Tax Audit Services (Section 44AB)
Tax audit under Section 44AB of the Income Tax Act — Form 3CA/3CB and Form 3CD reporting by ICAI member firm.
What our Tax Audit under Section 44AB service covers
How the engagement works
Documents required
- → Trial balance and final accounts
- → Books of account (Tally backup or Excel)
- → Audited financial statements (if companies)
- → Bank statements + BRS for the year
- → GST returns (1, 3B, 9, 9C) and reconciliation
- → TDS returns (24Q, 26Q, 27Q) and Form 26AS
- → Stock statements and physical verification
- → Fixed asset register with depreciation working
- → Loan agreements, loan confirmations
- → Cash flow statement and major cash transactions
- → Related-party transactions register
- → MSME suppliers register and delay analysis
When is tax audit applicable? (Section 44AB)
| Taxpayer Type | Threshold | Form |
|---|---|---|
| Business — normal | Turnover > Rs 1 crore | 3CA + 3CD (if statutory audit) or 3CB + 3CD |
| Business — if <5% cash transactions | Turnover > Rs 10 crore | 3CA/3CB + 3CD |
| Profession | Receipts > Rs 50 lakh | 3CB + 3CD |
| Presumptive 44AD | Turnover > Rs 2 crore OR claims profit lower than 8%/6% | 3CB + 3CD |
| Presumptive 44ADA | Receipts > Rs 50 lakh OR claims profit lower than 50% | 3CB + 3CD |
| Presumptive 44AE | If declared profit is lower than prescribed amount per vehicle | 3CB + 3CD |
Form 3CD — what does it disclose?
Form 3CD is a comprehensive 44-clause statement. Key clauses include:
- Clause 13: Method of accounting (cash or mercantile) and stock valuation method
- Clause 16-17: Capital gains, depreciation chart (asset-block-wise)
- Clause 21: Personal expenses, capital expenditure, payments above prescribed limits
- Clause 22: MSME suppliers and amount payable beyond prescribed period (Section 43B(h))
- Clause 26: Section 43B disallowances (statutory dues unpaid)
- Clause 27: Loans/deposits in cash above Rs 20,000 (Section 269SS, 269T)
- Clause 31: Sec 40A(2)(b) related-party expenses
- Clause 32: Brought-forward losses and unabsorbed depreciation
- Clause 34: TDS details and short-deductions
- Clause 36: Quantitative details of trading and manufacturing
- Clause 40-42: GST-related disclosures and reconciliations
Due date and penalty for late audit
The tax audit report must be uploaded on the e-filing portal by 30 September of the assessment year. The corresponding ITR is then filed by 31 October. Penalty for non-completion under Section 271B: 0.5% of turnover or Rs 1,50,000, whichever is lower. Genuine reasons for delay (Section 273B) can be pleaded but acceptance is rare.
Special provisions worth noting
- Section 43B(h) — payments to MSME suppliers must be made within 45 days (or as per written agreement, max 45 days) of acceptance, else disallowed in the year of accrual. Tax audit verifies MSME register and payment timing.
- Section 40A(3) — cash payments above Rs 10,000 per day per person are disallowed (Rs 35,000 for transporters).
- Section 269SS / 269T — loans/deposits taken or repaid in cash above Rs 20,000 attract 100% penalty.
- Section 56(2)(x) — gifts above Rs 50,000 in aggregate (other than specified exemptions) are taxable.
Frequently asked questions
Is tax audit applicable if I have only 5 lakh income but Rs 2 crore turnover? +
Yes. Tax audit applicability is based on turnover/receipts, not income. With Rs 2 crore turnover, you cross the Rs 1 crore threshold under Section 44AB(a). If at least 95% of your turnover receipts and payments are non-cash (digital), the threshold extends to Rs 10 crore.
I opt for presumptive taxation under 44AD with 8% profit. Do I need tax audit? +
No. If you offer at least 8% of turnover (6% if digital receipts) as deemed profit under Section 44AD, tax audit is not applicable up to Rs 2 crore turnover. However, if you declare lower than the deemed profit AND your income exceeds the basic exemption limit, tax audit becomes mandatory. The presumptive scheme also has a 5-year continuity rule under 44AD(4).
Can the same CA conduct both statutory audit and tax audit? +
Yes, the same Chartered Accountant or audit firm can conduct both audits for the same client. In fact, this is the most common practice and is encouraged for efficiency. The auditor issues Form 3CA (cross-referring to the statutory audit report) along with Form 3CD. There is no independence conflict between statutory and tax audits.
What is the difference between Form 3CA and 3CB? +
Form 3CA is used when the taxpayer is also subject to a statutory audit under another law (Companies Act, LLP Act). The tax auditor refers to the statutory audit report and issues a brief opinion. Form 3CB is used for sole proprietorships, partnerships and other entities not subject to other statutory audits. It is more elaborate as the auditor expresses opinion on the books from scratch. Both are accompanied by Form 3CD.
What if my tax audit report has qualifications? +
Qualifications in the audit report or adverse comments in Form 3CD (e.g., on clauses 17, 21, 22, 26, 27, 34) can lead to scrutiny notices under Section 142(1)/143(2). The Department uses these as red flags. Common qualifications: unverified opening balances, incomplete books, related-party transactions without arm's length pricing, MSME delays. We help rectify issues before signing where possible.
Can tax audit be revised after filing? +
Yes. A revised tax audit report can be filed if material errors are discovered, by uploading a fresh Form 3CA/3CB and 3CD before 31 December of the assessment year. After this date, only a rectification application under Section 154 is available for the corresponding ITR — not for the audit report itself.
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