Tax Audit Under Income Tax Act 1961

In India, a tax audit is mandated under the Income Tax Act, 1961 for certain individuals and businesses to ensure proper maintenance and accuracy of financial records. A tax audit involves an examination of the accounts of a taxpayer by a chartered accountant and is applicable when specific financial thresholds are crossed.

Businesses with an annual turnover exceeding ₹1 crore are required to undergo a tax audit. This provision ensures that business entities with significant income are maintaining accurate records and complying with tax regulations. The turnover threshold may be higher (up to ₹10 crores) in certain cases where most transactions are conducted digitally.

Similarly, professionals such as doctors, lawyers, architects, and chartered accountants must get their accounts audited if their gross receipts exceed ₹50 lakhs in a financial year. This applies to individuals engaged in specified professions as defined under the Income Tax Act.

In addition to the above, individuals involved in specified businesses or professions—such as those engaged in lottery, betting, or horse racing—are also required to have their accounts audited, regardless of turnover or receipts. These categories are closely monitored due to the nature of their income sources.

The tax audit must be carried out by a qualified chartered accountant, and the audit report should be filed with the Income Tax Department by the specified due date, usually 31st October of the relevant assessment year. Non-compliance with tax audit requirements may lead to penalties and interest charges under the Income Tax Act.