We all are aware that we will have to go through a tax audit if our turnover exceeds the prescribed number as prescribed by statute i.e. Income Tax Act 1961.

However, have you ever wondered why there is a requirement for tax audits? Or, what are the objectives of tax audits? In order to help you out, in this article, we will tell you all about the objectives of tax audits.

  • It is conducted to report the requirements of Forms – 3CA/3CB and 3CD, which the tax auditor has to present in front of the tax authority.

  • Proper maintenance of the book of accounts and other similar records is another such objective of tax audits.

  • It is also done to get a proper record about the income of the taxpayers as well as their tax deductions.

  • Tax audits are conducted to facilitate the administration of tax laws by presenting the accounts properly in front of authorities.

  • Another objective of tax audits is saving verification time. Tax Audits help save time that is taken during routine verification, which is an even more tedious procedure than auditing.

Well, that was all about the objectives of tax audits. We hope that you found this article to be helpful.

If you need any help regarding tax audits in Bangalore, then you can get in touch with some of the best Chartered Accountants in Bangalore.

You can also check out our article on tax audits to know more on the subject.

What is a Tax Audit?

A tax audit is an examination of the books of account and relevant records of a taxpayer to
verify income declarations, deductions, and compliance with the Income-tax Act, 1961. It
standardizes reporting for the tax authority and reduces routine verification time by ensuring
accounts are presented properly

Who is Covered under Section 44AB?

  • Businesses whose total sales/turnover exceed the prescribed threshold in a financial year.
  • Professionals whose gross receipts exceed the prescribed threshold.
  • Specified cases opting for presumptive taxation but crossing conditions that trigger audit.

Reporting is made in the applicable audit forms (Form 3CA/3CB with Form 3CD) as prescribed

Tax Audit vs Statutory Audit

Aspect Tax Audit (Sec. 44AB) Statutory Audit
Purpose Ensure proper reporting for tax law compliance and accurate computation of taxable income Provide a true and fair view of financial statements as per applicable laws (e.g., Companies Act)
Trigger Thresholds/conditions under Section 44AB Entity type/legal requirement (e.g., companies, certain societies)
Reporting Form 3CA/3CB with Form 3CD annexure Auditor’s report on financial statements (format per statute/standards)
Focus Books, deductions, and compliance specific to tax provisions; facilitates tax administration & saves verification time Overall financial reporting framework and internal controls

Tax Audit at a Glance: Objectives, Benefits & Forms

Objectives (What it ensures) Benefits (Why it helps) Forms Involved
  • Proper maintenance of books and similar records
  • Accurate reporting of income & deductions
  • Accounts presented properly to authorities
  • Time-saving vs. routine verification}
  • Lower risk of disallowances/penalties
  • Smoother assessments; faster query resolution
  • Stronger compliance trail for lenders/investors
  • Early detection of gaps in record-keeping
  • Form 3CA (where statutory audit is applicable)
  • Form 3CB (where statutory audit is not applicable)
  • Form 3CD (detailed particulars/annexure)

Related reading:
Tax audit slabs for businesses & professionals |
What to do if you receive an audit notice

Frequently Asked Questions

Who needs a tax audit?

Businesses and professionals crossing the prescribed turnover/gross receipts thresholds under
Section 44AB, and certain presumptive taxation cases as per law. If you’re unsure, consult
a professional to verify your status for the current year.

What happens if tax audit is not done?

Non-compliance can lead to penalties and increased scrutiny during assessment. It may also
result in disallowances and delays in completing tax proceedings.

What is the penalty under Section 44AB?

The Act prescribes a penalty for failure to get accounts audited/report furnished within
the due date. Always check the current year’s provisions and circulars, or seek professional advice.

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