The provisions for tax audits in India are covered under section 44AB of the Income Tax Act 1961. As per section this section, every person who falls under one of the categories listed below shall have their accounts audited by a practicing chartered accountant (CA), and have an audit report submitted by the due date for the filing of income return.

Section 44AB sets the eligibility as follows –
If total sales, turnover or gross receipts exceeds Rs. 1 Crore in any previous year, in case of business

Note: Provided that this section is not applicable to the person, who opts for presumptive taxation Scheme under Section 44AD and his total sales or turnover does not exceed Rs 2 crores.

If gross receipts exceeds Rs. 50 Lakhs in any previous year, in case of profession.

Section 44AD –
Presumptive income of eligible business shall be 8 % of gross receipt or total turnover (if turnover of eligible business does not exceed Rs. 2 crore).

Note: Presumptive income shall be calculated at rate of 6% in respect of total turnover or gross receipts which is received by an account payee cheque or draft or use of electronic clearing system.”

Section 44ADA –
Presumptive income shall be 50% of total gross receipt if the total gross receipts from such profession do not exceed Rs. 50 lakh in a previous year.

Section 44AE –
Rs. 7,500 for every month during which the goods carriage is owned by the taxpayer

Such an audit report shall be filed using Form 3CA (in case of a company), Form 3CB (other than a company), and shall be accompanied with Form 3CD. The due date of filing a return, in the case where an assessee is required to furnish an audit report, is September 30th after the end of the financial year.

Penalty under section 44AB
If a person has failed to audit his books of accounts as per the provisions of act then he shall be liable to pay penalty under section 271B of income tax act.

As per the section 271B penalty is One-half per cent of total sales, turnover or gross receipts, etc., or Rs. 1,50,000, whichever is less.