Q.1 Who is required to get a tax audit conducted under the Income Tax Act, 1961?
All companies irrespective of turnover
Individuals with income below ₹2,50,000
Businesses or professions exceeding prescribed turnover limits
Agricultural income earners
Explanation - Tax audit under the Income Tax Act is required for businesses and professions whose turnover or gross receipts exceed specified limits during the financial year.
Correct answer is: Businesses or professions exceeding prescribed turnover limits
Q.2 Which section of the Income Tax Act deals with tax audit?
Section 44AB
Section 139
Section 80C
Section 10A
Explanation - Section 44AB of the Income Tax Act mandates the tax audit for specified persons including businesses and professionals exceeding certain limits of turnover or gross receipts.
Correct answer is: Section 44AB
Q.3 Who is qualified to conduct a tax audit?
Chartered Accountant only
Company Secretary
Cost Accountant
Any employee of the company
Explanation - Only a Chartered Accountant, as defined under the Chartered Accountants Act, 1949, is authorized to conduct a tax audit under Section 44AB.
Correct answer is: Chartered Accountant only
Q.4 By when must a tax audit report be submitted for a company having a financial year ending March 31?
30th June of the following year
30th September of the following year
31st July of the following year
31st December of the following year
Explanation - The tax audit report under Section 44AB must be furnished by 30th September of the assessment year following the financial year under audit.
Correct answer is: 30th September of the following year
Q.5 What is the primary objective of a tax audit?
Detect frauds in the company
Ensure compliance with tax laws and verify correctness of income and deductions
Prepare financial statements
Evaluate business performance
Explanation - The tax audit primarily aims to ensure that the taxpayer has correctly reported income and claimed deductions in accordance with the Income Tax Act.
Correct answer is: Ensure compliance with tax laws and verify correctness of income and deductions
Q.6 Which form is used for submitting a tax audit report under Section 44AB?
Form 16
Form 3CA/3CB and 3CD
Form 26AS
Form 10E
Explanation - Tax audit reports are submitted electronically using Form 3CA or 3CB along with Form 3CD which contains detailed particulars as required under Section 44AB.
Correct answer is: Form 3CA/3CB and 3CD
Q.7 Which of the following is exempted from tax audit?
A business with turnover exceeding ₹1 crore
A professional with gross receipts exceeding ₹50 lakh
A person covered under the presumptive taxation scheme under Section 44AD
A company
Explanation - Assessees opting for presumptive taxation under Section 44AD, meeting the prescribed conditions, are exempt from tax audit requirements.
Correct answer is: A person covered under the presumptive taxation scheme under Section 44AD
Q.8 Which of the following is NOT a responsibility of a tax auditor?
Verifying books of accounts for correctness
Ensuring compliance with tax provisions
Issuing certificates under Section 80C
Reporting in the prescribed form
Explanation - A tax auditor verifies accounts and ensures compliance, but issuing certificates under Section 80C (related to deductions) is not part of the auditor’s duties.
Correct answer is: Issuing certificates under Section 80C
Q.9 Under Section 44AB, what is the turnover limit for a business to require a tax audit for FY 2024-25?
₹50 lakh
₹1 crore
₹2 crore
₹5 crore
Explanation - For business taxpayers, a tax audit is required if turnover exceeds ₹1 crore (or ₹10 crore in case of certain digital transactions) during the financial year.
Correct answer is: ₹1 crore
Q.10 For professionals, the tax audit limit under Section 44AB is based on:
Turnover exceeding ₹50 lakh
Gross receipts exceeding ₹50 lakh
Income exceeding ₹10 lakh
Net profit exceeding ₹25 lakh
Explanation - Professionals are required to get their accounts audited if their gross receipts exceed ₹50 lakh in a financial year under Section 44AB.
Correct answer is: Gross receipts exceeding ₹50 lakh
Q.11 Can a company’s tax audit report be submitted manually?
Yes, always
No, it must be submitted electronically
Yes, but only if the company is a small enterprise
Yes, if approved by the tax officer
Explanation - All tax audit reports under Section 44AB must be submitted electronically through the Income Tax Department’s e-filing portal.
Correct answer is: No, it must be submitted electronically
Q.12 What is Form 3CD used for in a tax audit?
Declaration of advance tax
Detailed statement of particulars required in tax audit
Income tax return filing
PAN application
Explanation - Form 3CD contains detailed information about the taxpayer’s income, deductions, and other particulars as required under Section 44AB.
Correct answer is: Detailed statement of particulars required in tax audit
Q.13 If a person fails to get a tax audit done when required, what is the penalty under the Income Tax Act?
₹5,000
₹10,000
0.5% of turnover or gross receipts
₹1 lakh flat
Explanation - Under Section 271B, a penalty of 0.5% of the turnover or gross receipts is levied if a taxpayer fails to get a tax audit conducted as required.
Correct answer is: 0.5% of turnover or gross receipts
Q.14 Which of the following is considered a professional for tax audit purposes?
Doctors, lawyers, architects, and accountants
Businessmen only
Government employees
Agricultural income earners
Explanation - Professionals for tax audit purposes include those providing services in the fields of medicine, law, architecture, accountancy, etc., as per Section 44AB.
Correct answer is: Doctors, lawyers, architects, and accountants
Q.15 A tax audit report is primarily intended for:
Internal management review
Submission to the Income Tax Department
Bank loan applications
Company shareholders
Explanation - The tax audit report is prepared to verify compliance with tax laws and submitted to the Income Tax Department as per legal requirements.
Correct answer is: Submission to the Income Tax Department
Q.16 Which financial year’s accounts are audited for tax purposes?
Current financial year
Previous financial year
Next financial year
Any financial year chosen by taxpayer
Explanation - The tax audit is conducted for the financial year immediately preceding the assessment year (previous year) to ensure correctness of income declared.
Correct answer is: Previous financial year
Q.17 Is a non-resident taxpayer required to get a tax audit?
Yes, if carrying out business in India and meeting turnover limits
No, never
Yes, irrespective of income
Only if employed in India
Explanation - Non-resident taxpayers engaged in business in India must comply with Section 44AB if their turnover or gross receipts exceed the prescribed limits.
Correct answer is: Yes, if carrying out business in India and meeting turnover limits
Q.18 Which of the following is required to be maintained to facilitate a tax audit?
Books of accounts and supporting documents
Only bank statements
Only cash receipts
None of the above
Explanation - To conduct a tax audit, proper books of accounts, vouchers, and other supporting documents must be maintained as evidence of income and deductions.
Correct answer is: Books of accounts and supporting documents
Q.19 Which section provides penalty provisions for failure to comply with tax audit requirements?
Section 271B
Section 44AB
Section 80C
Section 115BBE
Explanation - Section 271B prescribes penalties for failure to get accounts audited under Section 44AB.
Correct answer is: Section 271B
Q.20 Is the tax auditor responsible for assessing the tax liability of the taxpayer?
Yes, fully responsible
No, the auditor reports findings but does not assess tax
Yes, for companies only
Yes, if turnover exceeds ₹5 crore
Explanation - A tax auditor’s role is to report on compliance and correctness of records; assessment of tax liability is done by the Income Tax Department.
Correct answer is: No, the auditor reports findings but does not assess tax
Q.21 Which of the following documents is not part of tax audit submission?
Form 3CD
Balance Sheet and P&L account
Form 16
Tax Audit Report Form 3CA/3CB
Explanation - Form 16 relates to TDS on salary and is not part of tax audit submission, whereas Form 3CA/3CB and 3CD along with financial statements are required.
Correct answer is: Form 16
Q.22 Which of the following income types is generally excluded from the scope of tax audit?
Business income
Professional income
Agricultural income
Income from capital gains in business
Explanation - Agricultural income is exempt under the Income Tax Act and is generally not included in the scope of tax audit under Section 44AB.
Correct answer is: Agricultural income
Q.23 How does a tax audit help the Income Tax Department?
By generating revenue through penalties only
By providing verified details of taxpayer’s income and deductions
By auditing internal management processes
By monitoring stock prices
Explanation - Tax audit ensures that accurate and verified information is submitted by taxpayers, aiding the Income Tax Department in proper assessment.
Correct answer is: By providing verified details of taxpayer’s income and deductions
Q.24 Is a tax audit required for a partnership firm with turnover of ₹75 lakh?
Yes, always
No, as turnover is below ₹1 crore
Yes, if it has more than 5 partners
No, for all partnership firms
Explanation - For partnership firms, a tax audit under Section 44AB is required only if turnover exceeds ₹1 crore in a financial year.
Correct answer is: No, as turnover is below ₹1 crore