Introduction:
Section 44AB of the Income Tax Act, 1961 lays down the provisions related to tax audit of businesses. Tax audit is mandatory for certain businesses as per the provisions of this section. One of the sub-sections of Section 44AB is Section 44AB(c), which pertains to professionals. In this blog, we will discuss the provisions of Section 44AB(c) in detail.
Who is a professional?
As per the Income Tax Act, 1961, a professional is a person who is engaged in a profession that requires him/her to possess specialized knowledge and skills. Some examples of professionals are doctors, lawyers, chartered accountants, architects, etc.
Applicability of Section 44AB(c):
Section 44AB(c) applies to professionals who carry on a profession and whose gross receipts in the previous year exceed Rs. 50 lakh. This means that if the gross receipts of a professional exceed Rs. 50 lakh in a financial year, then he/she is required to get his/her accounts audited as per the provisions of Section 44AB(c).
Objectives of Section 44AB(c):
The main objectives of Section 44AB(c) are as follows:
- To ensure that the books of accounts of professionals are maintained properly and accurately.
- To ensure that the income declared by professionals in their income tax returns is correct and matches with the income shown in their books of accounts.
- To ensure that tax evasion by professionals is prevented and that they pay their fair share of taxes.
Audit under Section 44AB(c):
If a professional is required to get his/her accounts audited under Section 44AB(c), then he/she needs to get the audit done by a practicing chartered accountant. The chartered accountant will audit the books of accounts of the professional and give his/her report in
Form 3CA/3CB and Form 3CD.
The report given by the chartered accountant will contain the following information:
- Details of the books of accounts maintained by the professional.
- Details of the audit conducted by the chartered accountant.
- Details of any discrepancies or irregularities found in the books of accounts.
- Details of the income declared by the professional and the taxes paid by him/her.
- Any other information that the chartered accountant deems necessary.
Due date for filing tax audit report:
The tax audit report in Form 3CA/3CB and Form 3CD needs to be filed by the professional along with his/her income tax return. The due date for filing the tax audit report is the same as the due date for filing the income tax return. However, if the due date for filing the income tax return is extended, then the due date for filing the tax audit report will also be extended.
Consequences of non-compliance:
If a professional is required to get his/her accounts audited under Section 44AB(c) and fails to do so, then he/she will be liable to pay a penalty. The penalty will be equal to 0.5% of the total sales, turnover, or gross receipts, whichever is higher, subject to a maximum penalty of Rs. 1,50,000. In addition to the penalty, the professional may also be liable to pay interest and other charges as per the provisions of the Income Tax Act, 1961.
In addition to the mandatory tax audit, professionals also need to ensure proper maintenance of their books of accounts throughout the year. This includes recording all transactions accurately and timely, maintaining receipts and invoices, and keeping track of all expenses and income.
Proper bookkeeping not only ensures compliance with tax laws but also helps professionals make better business decisions. It provides a clear picture of their financial position, helps identify areas of improvement, and assists in budgeting and forecasting.
Conclusion
In conclusion, Section 44AB(c) of the Income Tax Act, 1961 is an essential provision for professionals. It ensures proper maintenance of books of accounts and accurate income tax reporting. Compliance with this provision is not only mandatory but also beneficial for professionals in the long run. Therefore, professionals should ensure timely and accurate tax compliance and bookkeeping throughout the year.
Read more useful content:
- section 145 of income tax act
- section 10e of income tax act
- section 9 of the income tax act
- section 94b of income tax act
- section 206aa of income tax act
Frequently Asked Questions (FAQs)
Who is considered a professional as per Section 44AB(c) of the Income Tax Act, 1961?
A: Professionals are individuals engaged in professions that require specialized knowledge and skills, such as doctors, lawyers, chartered accountants, architects, etc.
Is tax audit mandatory for all professionals?
A: No, tax audit is mandatory for professionals whose gross receipts exceed Rs. 50 lakh in a financial year.
Can a professional get their accounts audited by anyone other than a practicing chartered accountant?
A: No, a professional is required to get their accounts audited only by a practicing chartered accountant.
What is the due date for filing the tax audit report under Section 44AB(c)?
A: The due date for filing the tax audit report is the same as the due date for filing the income tax return. However, if the due date for filing the income tax return is extended, then the due date for filing the tax audit report will also be extended.
What are the consequences of non-compliance with Section 44AB(c)?
A: Non-compliance with Section 44AB(c) can result in penalties, interest, and other charges, making it important for professionals to ensure compliance.
What are the benefits of proper bookkeeping for professionals?
A: Proper bookkeeping ensures compliance with tax laws, provides a clear picture of financial position, helps identify areas of improvement, and assists in budgeting and forecasting.
Can a professional claim deductions if their accounts are not audited?
A: Yes, a professional can claim deductions even if their accounts are not audited. However, if their accounts are audited, it provides credibility to their tax return and can help avoid any penalties in case of discrepancies.
What is Form 3CA/3CB and Form 3CD?
A: Form 3CA/3CB is the audit report that a chartered accountant gives after auditing the books of accounts of a professional. Form 3CD is the statement of particulars required to be furnished under Section 44AB of the Income Tax Act, 1961.
Can a professional get an extension for filing the tax audit report?
A: Yes, a professional can get an extension for filing the tax audit report if the due date for filing the income tax return is extended.
Is it possible for a professional to conduct their own tax audit?
A: No, a professional cannot conduct their own tax audit as it is mandatory to get their accounts audited by a practicing chartered accountant.
