TAX AUDIT is review of accounts of the business organization or an individual in respect of income and deductions. Section 44AB under Income tax contains the provision for conducting the TAX AUDIT which aims to ascertain the compliance of various provisions of the Income-tax Law and the fulfillment of other requirements of the Income-tax Law. The audit is conducted by the chartered accountant and his observations are recorded in tax audit report.

Who are entitled to get tax audited?

AUDIT FOR BUSINESSES

Any person carrying on a business whose total sales, turnover or gross receipts exceeds Rs.1 crorein previous year

AUDIT FOR PROFESSION

Any person carrying on whose gross receipts exceeds Rs. 50 lakhs in previous year

Turnover Limit for Audit

(With effect from the finance act 2017)

Objectives of Tax Audit

Tax audit is being conducted to achieve the following:

• A proper system ensures maintenance of its record of income, revenue, expense etc in a correct and verified manner.
• Tax audit minimize the risk of frauds and  other illegal practices
• In case of discrepancies, there is an ease of methodical examination of the well-maintained record.
• It also facilitates the implementation of tax laws during routine verification since proper presentation of accounts saves time of the assessing officer

Due Date for Getting Account Audited

A person required to get audited should get its account audited on or before 30^th September of relevant assessment year.

PENALTY FOR NON-COMPLIANCE

If any person who is required to comply with section 44AB, does not do so, as per the prescribed manner, a penalty may be imposed by the Assessing Officer which may be:

(a) 0.5% of the total turnover, sales or gross receipts, in business, or of the gross receipts in profession of an individual, in such year or years as under scrutiny, OR

(b) Rs. 1,50,000.

Whichever is lower

However, Income tax also contain the provision that if there is a reasonable and bonafide cause penalty may not be imposed.

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Have you ever heard about the term audit or tax audit? Who does this work tax audits? Take a deep breath we will answer all your questions one by one. It basically involves the verification of the accounts maintained by the assessee. Auditors validate the Income the tax computation and compliance with the laws of income tax. A certified chartered accountant carries out the auditing of accounts.

Further, we will discuss the tax audit limit, audit due date etc.

What do you understand by tax audit limit

There are certain tax audit procedures and tax audit limit, whose provisions are mentioned under the section 44AD of the Income Tax. Let’s take a look at what are the limits and basically who all have to undergo Tax Audits.

In accordance with the Section 44AB, a tax audit is required by the business entities, working professionals, and person who are already enrolled under the Presumptive Taxation Scheme.

In the case of Business

If you operate a business in India, and your total turnover sales or gross receipts are more than Rs. 1 crore in any of the previous year, then there would be a requirement of Tax Audit.

In accordance with section 2(3), business is defined as any trade, commerce, manufacturing activity or any adventure or concern in the nature of trade, commerce, and manufacture.

In the case of a Profession

If you are a working professional and your gross receipts in that profession are more than Rs. 50 lakhs in any of the previous year, then there would be a tax audit.

If you are wondering, what all professions are involved in this, there is a list mentioned below-

• Engineer
• Legal Professionals-Advocate or lawyer
• Technical consultant
• Accountant
• Technical Consultant
• Medical Professionals-Doctor, Physiotherapist etc
• Architect
• Authorized Representative
• Interior Decorator

In the case of the Presumptive Taxation Scheme

There is a presumptive taxation scheme available under section 44AD, if you are enrolled under this scheme or the annual turnover or sales exceeds Rs. 2 crore then there would be a requirement of a tax audit.

You have to obtain the tax audit report if you are already enrolled under the presumptive taxation scheme (Even if the profits made by you, are lower than the mentioned amount under the presumptive taxation scheme).

Hope you have an idea by now, regarding who has to obtain the tax audit reports and what are their limits.

Have you taken a note of next due date of tax audit reports? 

The tax audit due date for 2019 has not been announced yet by the Income-tax department. But still, just to give an idea; for the year of 2018, the tax audit due date was 30^th September.

Keep yourself audit ready beforehand.

For more information, please contact Enterslice.

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Audit is all about review. Tax audit involves the process of reviewing or examining of the books of accounts of a business entity to confirm the income tax computations, deductions and other such financial calculations have been done in compliance with Income Tax laws of the country.  Tax audit enables easy income tax computation as well as Income Tax Return filing easy. The Tax Audit limit is regulated by Section 44D of the Income Tax Act.  Person carrying business or in a profession have to be get their books of accounts audited compulsorily under Section 44AB pertaining to certain tax audit applicability.

The tax audit applicability categories the following persons who have to undergo the audit process on a mandatory basis:-

• Persons carrying on business with a turnover or aggregate sales exceeding 1 crore, but have not opted for Presumptive Taxation Scheme.
• Persons carrying out business with total or aggregate sales or turnover exceeding 2 crore and have opted for the Presumptive Taxation scheme
• Professionals whose gross receipts exceed Rs. 50 lakh annually

The presumptive taxation scheme under Section 44AD mentions that tax audit is not required for persons who are enrolled for the scheme and have a turnover of less than INR 2 crore annually.

Purpose of Tax Audit

• The tax audit process ensures that the books of accounts have been maintained correctly and as per Income Tax provisions.
• Tax audit brings out discrepancies as pointed out by the tax auditor after a thorough examination of the books.
• Since the tax audit report follows a prescribed format, it saves time of tax authorities in checking out minute details and correctness of the information as filed in ITR.

Tax Audit Report Format

The audit report is required to be furnished either through –

• Form 3CA – this report is applicable for persons carrying out business or profession who need to get their books of accounts mandatorily audited as per the Act.
• Form 3CB – this form is required to be furnished by persons carrying out business or profession for whom it is not compulsory to get their books audited under the Act.
• Form 3CE – is applicable for Non-residents and foreign companies that receive any form of payment or fees for technical services or royalty from the Government of India.

Tax audit applicability has a legal validation only if submitted by a Chartered Accountant or a firm of Chartered Accountants or a Statutory Auditor. The tax audit report needs to be signed by the accountant or the auditor who has performed the audit.

For e-filing the online tax audit form, the report needs to be signed by the accountant or the auditor as well as his membership number needs to be mentioned alongside. The audit report first needs to be submitted to the concerned person or taxpayer digitally to get his approval before the online tax audit is filed electronically.

There is a tax audit limit for Chartered Accountants too. They cannot undertake more than 60 tax audits in a year.

The penalty for not getting the books of accounts audited for persons who are compulsorily required to get the audit done is 0.5% of the turnover or gross receipts, with a maximum limit of Rs. 1.5 lakh. The penalty is levied under Section 271B of the IT Act. However, the person is given a chance to give reasons for non-compliance, and if found acceptable, no penalty is imposed.

The audit report needs to be obtained before or by 30^th September of the said assessment year. Only the 3CE report has a due date of 30^th November of the said assessment year.  More info visit http://entersliceindia.pbworks.com/w/page/129363090/Things-to-know-about-the-Tax-Audit

 Tax Audit

As per section 44AB of Income Tax the Tax audit has been made mandatory and that all taxpayers are required to get the accounts of their business or organization audited by an outside agency.

Things are inspected during Tax audit

An examination of an individual’s or organization’s tax returns is verified. And that all the income, expenditure and deduction information have been filed correctly.

            In case an organization is covered to undergo an audit covered in other provision of law, is also required to do Tax audit?

No, in case an organization is required to undergo tax audit under other than Income tax act, then Tax audit is not compulsory for such organization.

Applicability:

Audit report:

Audit report is filed by qualified professionals usually the CA :-

• Form No. 3CA is furnished when a person carrying on business or profession is already mandated to get his accounts audited under any other law.
• Form No. 3CB is furnished when a person carrying on business or profession is not required to get his accounts audited under any other law
• In addition to above Form No. 3CD which forms part of audit report is also filed.

Due Date for Filing Tax Audit Reports:

The Due date of filing tax audit report under section 44AB is 30th September of the assessment year.

Penalty for Non-Compliance under sec. 44AB:

In case of non compliance a person is liable for paying penalty of 0.5% of his turnover / gross receipts subject to a maximum of Rs 1,50,000.

Due date for filing the tax returns

 Under section 44AB due date to file Tax return is 30th September of the assessment year.

In transfer pricing audit cases, the due date for tax audit return filing is 30th November of the assessment year.

Advantages of Tax Audit:

• It makes income computation more efficient
• Correct liability is reached while Audit.
• It acts as an eye opener for fraudulent practices.
• Books of accounts of the company/entity are properly maintained.
• Documentation is kept proper all the time, keeping in mind the preparedness for tax Audit.

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