Tax Audit Applicability & Penalties for AY 2023-24

Tax Audit Applicability & Penalties
Author name: Ashish Gambhir
Created date: 23-09-2023
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In the ever-evolving landscape of taxation, staying compliant with the latest regulations is crucial for individuals and businesses alike. One such critical aspect of taxation is the applicability of tax audits and the associated penalties. As we enter Assessment Year (AY) 2023-24, it's essential to understand the rules and consequences related to tax audits. In this comprehensive guide, we will explore tax audit applicability and the penalties that may be imposed for non-compliance.

Understanding Tax Audit

What is a Tax Audit?

A tax audit is a systematic examination of a taxpayer's financial records and statements by the Income Tax Department. It is conducted to ensure that the taxpayer has accurately reported their income and paid the appropriate amount of tax. Tax audits help in promoting transparency and reducing tax evasion.

Who Can Be Subject to Tax Audit?

Tax audits are typically applicable to certain categories of taxpayers, including:

?         Businesses: Any business with a turnover exceeding Rs. 2 crores is liable for a tax audit.

?         Professionals: Professionals like doctors, lawyers, and consultants with gross receipts over Rs. 50 lakhs may also face tax audits.

?         Specified Persons: Individuals engaged in specified activities like horse racing, owning racehorses, or those earning income from lottery, gambling, etc., may be subjected to tax audits.

?         Presumptive Income Scheme: Taxpayers opting for the presumptive income scheme under section 44AD must undergo a tax audit if their total income exceeds the prescribed limit.

Penalties for Non-Compliance

1.       Late Filing of Tax Audit Reports

Failing to file the tax audit report within the due date can result in penalties. The penalty amount depends on the extent of the delay, but it can be substantial.

2.       Inaccurate Reporting

Providing inaccurate information during a tax audit can lead to penalties of up to 50% of the tax payable on the under-reported income.

3.       Concealment of Income

If a taxpayer is found to have concealed income or furnished false information, penalties can be as high as 200% of the tax on the concealed income.

4.       Non-Cooperation

Failure to cooperate with the tax authorities during an audit can lead to penalties. Non-cooperation includes not providing necessary documents or obstructing the audit process.

5.       Other Penalties

Apart from the above, there are various other penalties for specific violations, such as underreporting of income from international transactions or not maintaining proper books of accounts.


In conclusion, tax audit applicability and penalties for AY 2023-24 are critical aspects of the Indian taxation system. Taxpayers must be aware of their obligations and ensure compliance to avoid hefty penalties and legal consequences. Staying informed and seeking professional guidance can help individuals and businesses navigate the complexities of tax audits successfully.

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