The Guidance Note on Tax Audit under Section 44AB (Revised 2025) by ICAI, provides comprehensive directions for Chartered Accountants on conducting tax audits under the Income-tax Act, 1961. It incorporates recent amendments, updated reporting requirements in Form 3CD, and interpretations of terms like turnover, profession, and gross receipts. It outlines audit applicability, procedural standards, and detailed clause-wise reporting. The note emphasizes professional judgment, ethical conduct, and accurate documentation. It also addresses special cases, GST interplay, and presumptive income scenarios. This updated edition serves as a vital tool for professionals to ensure compliance, accuracy, and efficiency in tax audit assignments.
The Guidance Note provides an authoritative framework for Chartered Accountants (CAs) to conduct tax audits under Section 44AB of the Income-tax Act, 1961, considering the recent amendments made by the Finance (No.2) Act, 2024 and Finance Act, 2025. This revised edition responds to the dynamic tax environment, ensuring members are equipped to meet statutory requirements efficiently.
Section 44AB mandates tax audits for businesses and professionals if their turnover or gross receipts cross prescribed limits: ₹1 crore for business (extended to ₹10 crore in certain non-cash transaction cases) and ₹50 lakh for professionals. It also applies to persons declaring income lower than deemed income under sections like 44AD, 44ADA, 44AE, etc.
The tax audit involves the preparation and submission of Form 3CA/3CB (audit report) and Form 3CD (statement of particulars). The auditor’s role is not merely reporting but ensuring that the accounts reflect accurate tax positions, enabling better tax administration and reducing routine verifications by Assessing Officers.
The Guidance Note traces the historical background of tax audit since its inception in 1985, detailing the evolution of legal and reporting requirements. Numerous amendments to Form 3CD have been made over time, reflecting the expanding scope and complexity of tax audits.
Detailed procedural guidance is provided on the scope and methodology of tax audit, including determining applicability, reporting obligations, working papers maintenance, and professional conduct. It emphasizes adherence to auditing standards and accounting principles while exercising professional judgment.
It explains key terms such as “turnover,” “gross receipts,” and “profession” with interpretations from judicial precedents and regulatory definitions (Companies Act, GST, CST, etc.). Specific treatment of income from shares, derivatives, consignment sales, and speculative transactions is also clarified for calculating turnover.
The Guidance Note also covers special cases such as presumptive taxation schemes, cash transactions threshold, multiple business units, and cross-border reporting. It stresses obtaining separate audit reports for specific deductions under Chapter VI-A and for audits under other laws like GST or Companies Act.
Particular focus is given to Clause-wise reporting in Form 3CD, which includes over 80 clauses spanning from general details (nature of business, partners, books of account) to specific tax provisions (e.g., 40A(3), 43B, 56(2), 269ST), ensuring that auditors report all material tax data required by the department.
The document includes updated illustrative formats like engagement letters, management representation letters, sample disclosures, and circulars for better practical implementation. Appendices provide legal references, mandatory guidelines, and FAQs to support auditors during complex assignments.
Finally, ICAI reinforces that this Guidance Note is indispensable for CAs and stakeholders involved in tax audits. It encourages professionals to uphold diligence, accuracy, and ethical standards while navigating evolving taxation norms, thus maintaining public trust and regulatory compliance.
The Guidance Note can be accessed at: https://a2ztaxcorp.com/wp-content/uploads/2025/07/Guidance-Note-on-Tax-Audit-under-Section-44AB-of-the-Income-tax-Act-1961-Revised-2025.pdf
