Tax Audit (Section 44AB)
A mandatory audit of accounts under the Income Tax Act, triggered once a business or professional's turnover or receipts cross specified thresholds, distinct from a statutory audit.
A tax audit under Section 44AB is required once a business's turnover, or a professional's gross receipts, crosses specified thresholds in a financial year, with a higher threshold for businesses where cash transactions stay below a specified proportion. It results in a formal report, filed by a chartered accountant, certifying specific financial and compliance details the Income Tax Act requires.
It's a separate requirement from a statutory audit under company law: a private limited company needs a statutory audit regardless of turnover, but may or may not also cross the tax audit threshold depending on its numbers. A business that opts for presumptive taxation under Section 44AD or 44ADA and stays within the relevant limits is generally exempt from a tax audit, which is one of the practical appeals of that scheme.
This glossary entry is for general informational purposes only and does not constitute professional tax, legal, or financial advice. Rules and rates change, so consult a qualified Chartered Accountant for advice specific to your situation.