Direct-to-consumer companies scaling online quickly breach the mandatory tax audit thresholds specified under Section 44AB of the Income Tax Act. If your brand’s annual sales turnover exceeds the statutory limit (with specific provisions for businesses accepting more than 95% of receipts digitally), a rigorous independent audit of your books of accounts by a Chartered Accountant is compulsory. This process culminates in filing Form 3CD, which requires precise reconciliation of all business expenses and revenue.
Ensure complete compliance with direct tax rules and verify the accuracy of your financial statements through independent Tax Audits under Section 44AB. Businesses exceeding turnover limits must undergo a formal tax audit to verify their deductions, tax computations, and compliance with TDS regulations. Our certified auditors review your accounting books, verify tax schedules, and file the comprehensive Form 3CD report on the e-filing portal.
The primary challenge during an e-commerce tax audit is the reconciliation of gross revenues. D2C brands collect revenue through a web of channels: cash-on-delivery (COD) via courier partners, payment gateways like Razorpay, and direct marketplace payouts. These payouts arrive net of marketplace commissions, shipping charges, and advertising fees. A tax auditor must verify that your books reflect gross revenue before platform deductions, and that all commission payments have been subjected to proper TDS (Tax Deducted at Source) compliance.
Tax audits closely examine the inventory ledger to ensure valuation consistency and compliance with Accounting Standard (AS) 2. For an online brand, this includes reviewing the accounting treatment of returned goods (RTO) and damaged inventory. If your brand writes off unsellable returned items as operational losses, you must provide a verifiable paper trail showing return initiation, warehouse receiving logs, and disposal records to prevent the tax auditor from disallowing these deductions.
Thorough auditing of income statements against turnover limits to fulfill statutory requirements.
Detailing expenditures, loans, and withholding tax compliance in the mandatory Form 3CD report.
Cross-verifying your financial books against direct and indirect tax returns to eliminate mismatches.
Direct, secure upload of certification documents and tax audit reports to the e-filing portal.
A tax audit is required if business turnover exceeds Rs 10 crore (where cash transactions are under 5%) or Rs 2 crore under normal terms.
Form 3CD is a comprehensive 44-paragraph statement detailing transaction compliance, deductions, and withholding details.
The statutory deadline for filing the tax audit report under Section 44AB is September 30th of the assessment year.
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