A tax audit in terms of the Income Tax Act, 1961, refers to examining and assessing a taxpayer’s books of account for detecting accuracy and conformity with the tax laws. It is mandated under Section 44AB and is applicable to businesses and professions having turnover or receipts in excess of specified amounts. A Chartered Accountant is required to carry out the audit and furnish it within the time specified in the specified forms (Forms 3CA/3CB and 3CD). The main objective is to make sure that the taxpayer maintains proper books of accounts and complies with the income tax provisions to bring transparency and accountability in the tax system.
Due Date for Tax Audit for FY 2024-25
According to Section 44AB of the Income Tax Act, 1961, the timeline for tax audit for FY 2024-25, which relates to the Assessment Year 2025-26, is September 30, 2025. A tax audit is required for individuals, firms, or companies that have a total turnover of ₹1 crore, or ₹10 crores in the case where cash transactions are below 5% of the total receipts and payments. Also, professionals must be put through a tax audit if their gross receipts happen to be over ₹50 lakhs during a financial year.
If businesses or professionals avail themselves of presumptive taxation (as provided in sections 44AD, 44ADA, etc.) and declare income less than the presumed income, then a tax audit will also be obligatory if their income is more than the basic exemption amount.
The report of the audit, as and when required to be submitted using Form 3CA/3CB and Form 3CD, has to be filed electronically by the due date. In a situation where an audit is required, October 31st, 2025, is the due date for submitting the Income Tax Return (ITR). Delayed filing of the audit will attract a penalty under Section 271B. However, the Central Board of Direct Taxes (CBDT) can extend these dates by formal announcements.
Who Should Complete a Tax Audit Before the Due Date?
As per the Income Tax Act, 1961, a tax audit is an obligatory scrutiny of accounts by a Chartered Accountant (CA) to check whether the taxpayer is in accordance with the law of income tax. This obligation is laid down under Section 44AB and is applicable to specific categories of taxpayers based on their turnover, revenues, and nature of profession or business.
Applicability
1. Companies under Section 44AB(a):
- A tax audit is required for individuals, firms, LLPs, and companies having total sales, turnover, or gross receipts of more than ₹1 crore in a financial year.
- In case the combined cash receipts and payments fall less than 5%, the limit becomes ₹10 crore.
2. Professionals — Section 44AB(b):
Professionals such as doctors, lawyers, architects, and consultants must get their accounts audited if the gross receipts are more than ₹50 lakhs in the financial year.
3. Presumptive Tax Cases [Section 44AB(d)/(e)]:
a. Section 44AD (Small Businesses):
If a taxpayer opts out of presumptive taxation and declares less than 8%/6% of turnover as income, but the total income is above the basic exemption limit, a tax audit is mandatory.
b. Section 44ADA (Professionals):
In case the professional reports income below 50% of the gross revenues, and the aggregate income is above the exemption limit, the tax audit is a must.
4. Section 44AE, 44BB, and 44BBB:
The same audit requirement is applicable if the taxpayer claims an income lower than what is considered under these sections.
Non-Applicability
- Individuals and HUFs not exceeding the above limits.
- Businesses under presumptive schemes that report income as per the rates specified and do not exceed income levels.
Importance of Completing a Tax Audit Before the Due Date
Law demands the timely completion of this audit as it is also vital for ensuring financial integrity, preventing fines and enabling the smooth income tax return filing.
1. Legal Conformity
Taxpayers eligible to submit tax audit papers on or before the due date—usually September 30 of the assessment year—are called for by the Act. Nonobservance of this deadline is considered noncompliance, and that could result in penalisation.
2. Avoiding Penalty (Section 271B)
Failure to file a tax audit within the prescribed time limit can result in a penalty of ₹1,50,000 or 0.5% of turnover/gross receipts, whichever is lower. Relief for “reasonable cause” can be allowed by the tax authorities, though, at their discretion.
3. Proper Time Income Tax Return (ITR) Filing
Taxpayers who are subject to an audit are not allowed to file their ITR until the report of the tax audit (Forms 3CA/3CB and 3CD) is received. The ITR filing due date for these taxpayers is October 31st. Delays in tax audits can lead to late filing of ITR, along with interest under Sections 234A, 234B, and 234C, and even scrutiny.
4. Loss Carry Forward Restrictions
When there is a delayed tax audit and late filing of return:
- You can lose the right to transfer business losses, speculative losses, and specified capital losses to future years.
- This can be harmful to long-term tax planning and profitability.
5. Maintain Business Reputation & Financial Discipline
Early completion of tax audit:
- Increases financial transparency and enhances the credibility of the business with stakeholders such as banks, investors, and regulatory authorities.
- Provides greater internal control and discipline in the bookkeeping of accounts.
6. Evading Scrutiny and Legal Troubles
Late filing can lead to:
- Tax notices, audits, or scrutiny by the Income Tax Department.
- Reputation loss and operating delays due to open compliance matters.
7. Government Tenders, Loans & Registrations Eligibility
Government and institutional lenders usually ask for:
- Current audited financials.
- Filed tax returns with audit reports appended, for loan sanctions, tenders, and business registrations.
Consequences of Non-Compliance
Defaulting to submit the tax audit report on the due date as mandated by Section 44AB of the Income Tax Act, 1961, incurs various legal, financial, and operational sanctions. These sanctions have adverse effects on the tax status, reputation, and future record of compliance of an individual or business.
1. Penalty under Section 271B
A penalty of ₹1,50,000 or 0.5% of the gross revenues or total turnover, whichever is less, might be imposed if a taxpayer fails to set up an audit of their accounts or to file the tax audit report within the allotted time.
Penalties may be waived if the assessee presents proof of justifiable cause for default, including natural catastrophe, sickness, system failure, or Chartered Accountant absence.
2. Failure to File Income Tax Return on Time
A report of audit is to be filed prior to the Income Tax Return (ITR). Delay in filing audit reports may result in a delay in filing returns, subjecting the taxpayer to:
- Late filing fees under Section 234F of ₹5,000.
- Interest under Sections 234A, 234B, and 234C on unpaid tax.
- Higher chances of scrutiny from the Income Tax department.
3. Loss of Carry Forward of Losses
Should the return be submitted following the due date due to audit delays?
- Losses under the Profits and Gains of activities or profession, including speculative business and capital gains, cannot be carried forward to other years.
- It impedes long-term tax planning and can raise future tax obligations.
4. Difficulty in Obtaining Loans, Tenders, and Registrations
Incomplete or missing tax audit reports:
- This leads to incomplete financial records, eroding credibility with banks and financial institutions.
- Affect loan eligibility, subsidies, government tenders, and business registrations.
5. Enhanced Risk of Scrutiny or Assessment
Late or non-filing can be viewed as a red flag by the Income Tax Department and can lead to:
- Notices for explanation
- Scrutiny assessments
- Tax audits under Section 142(2A) by the Department
6. Adverse Effect on Taxpayer’s Compliance Record
Recurring non-compliance impacts your compliance rating with the Income Tax Department. In the long term, it can result in:
- Frequent audits
- Increased risk profiling
- Breach of trusted taxpayer status
7. No Revisions are Possible in the Audit Report Once the Due Date Is Missed
If the tax audit report is submitted after the due date, any changes or corrections after filing become intricate or prohibited. It impacts financial reporting accuracy and results in disputes or mismatches.
Tips to Not Miss the Deadline
- Mark and set the due dates on your calendar.
- Appoint a Chartered Accountant early to cut down last-minute delays and block time slots.
- Keep your books up-to-date consistently.
- Scan your records into digital form.
- Evaluate Turnover Limits in Advance
- Coordinate with your Chartered Accountant about timelines.
- Monitor Portal Activity
- Do not file at the last moment.
- Set Alerts and Reminders
- Check for extensions.
Conclusion
All eligible taxpayers must meet the income tax audit deadline set forth by the Income Tax Act of 1961. Compliance not only ensures legal rectitude but also helps in the avoidance of heavy penalties, interest, and loss of some tax benefits, e.g., carry forward of losses. It provides for the timely and efficient submission of the income tax return in a manner that sustains the creditworthiness of the taxpayer with financial institutions and regulatory bodies. Being late may be followed by added scrutiny and work-related challenges. Therefore, companies and professionals should be proactive, keep accurate records, and work with their Chartered Accountant to get the audit finalised well ahead of the deadline.
