Overview

Government of India conducts various audits under various laws like company audit / statutory audit is done under company law provisions, cost audit, stock audit etc. Similarly, the Income Tax law has made ‘Tax Audit’mandatory. In a tax audit, the accounts of the business or any profession are reviewed, which makes the process of income calculation easier to make the return of income easier. / />

If the amount exceeds the prescribed limit, the Income Tax Act has made tax audit mandatory on annual gross turnover / receipts. The Chartered Accountant conducts tax audit as defined in section 44AB of the Income Tax Act, 1961.

In simple terms, a tax audit is an audit of tax-related matters.

About the Tax Audit

Section 44AB has made the tax audit compulsory for the following persons:

• Business: Rs 1 Crore

  This means that an assessor is required to conduct the audit mentioned in section 44 AAB if his annual gross turnover increases by Rs 1 crore in business.

• Profession: 50 lakhs

  This means that if a person increases his annual income in the profession by Rs. 50 lakh, then he has to undergo tax audit under section 44AB.

Taxation Scheme under Section-44A

• Businesses with annual turnover not exceeding Rs 2 crore are suitable for this scheme.
• It is not necessary to maintain books of account U / s 44AD
• Net income is estimated to be 8% of your gross business
• Digital method of payment is used to get gross receipts
• Net income is calculated as @ 6% and @ 8% of gross receipts
• If the assessee goes for the deductive u / s 44AD, it will have to follow the same section of audit for the next five financial years.
• To avail these schemes you have to file ITR 4

Taxation Scheme under Section-44 tougher

• Businesses whose annual gross income does not exceed Rs. 50 lakhs are suitable for this scheme.
• It is not necessary to maintain books of accounts under section 44ADA
• Net income is assessed at 50% of your gross receipt.
• If assessee goes for presumptive taxation under section 44ADA, it is required to follow the same section of audit for next five financial years.

What you need to do to be safe from tax audit?

The purpose behind engaging in any kind of business or commercial activity is to earn financial profit. And it is important to remember that profit must be earned legally and properly. Perform the following activities, which will result in a healthy tax audit:

• Income tax act has made it mandatory to maintain books of accounts
• It is necessary to calculate profit or profit under Chapter IV
• Income is taxable or loss is allowable
• Tax returns show taxable income and allowable losses mentioned in the file

Type of accounts

• Personal / Ownership
• Hindu Undivided Family
• Company
• Partnership Firm
• Association of Persons
• Local Authority

Some features in turnover for tax audit

• Lack of duty received after export sales is considered a part of turnover in the financial year.
• Income taken out of income by way of money lender or through foreign fluctuating income by an exporter is considered to be a part of turnover or advance received in the financial year and seized from customers and if The excise duty involved in the turnover should be debited to the profit and loss account.

What is must in turnover for tax audit?

• Sale or purchase of immovable property
• Income from selling assets held as investment
• Rental Income
• Residential or Commercial Property
• Reimbursement of expenses in the form of interest income and receipts.

Objectives

• Ensures that books of accounts are properly and properly maintained and certified by the tax auditor.
• Once the legal verification of the books of accounts is done, it is necessary to report observations or discrepancies by the tax auditor.
• The main objective of the tax audit is to extract a report as per the requirements of the form no. 3CA / 3CB and 3CD. Apart from reporting the needs of the above forms, proper tax audit is also required which will ensure that the books of accounts and records are properly maintained as they show the taxpayer's income and make a suitable claim for deduction.
• Annual audit is both time and money consuming process. A tax audit is required for every qualified assessment. The Income Tax Act has made it mandatory. In India, the tax advisor (Chartered Accountant) conducts the tax audit.
• A tax audit can prove to be financially profitable for a business.
• An audit lends credibility to an information published for employees, customers, suppliers, investors and tax authorities
• Audit assures shareholders that the figures in the accounts are correct and fair.
• A tax audit helps a company build a healthy reputation.

Concentrated Audit Report

The tax auditor presents his report in a specified form which can be Form 3CA or Form 3CB:

• Form No. 3CA is presented at a time when someone associated with a business or profession is already mandated to audit their accounts under another law
• Form No. 3CB is submitted when a person is involved in a business or profession, he is not required to audit his accounts under any other law

Necessary Way

The tax auditor submits his tax audit report online using his login credentials. Providing CA details in their login portal to taxpayers is important. Once the auditor uploads the audit report, it must be either accepted or rejected by the taxpayer in their login portal. If the report is rejected for some reason, all steps must be followed again until the taxpayer accepts the report. / />

Due date

is required for any person / persons who are / are under Section 4AAB to get their accounts audited or to get audit report on or before 30th September of that particular year Income is the due date for filing returns.

Types of tax audit

• The first type of audit is known as a correspondence audit. This is considered the simplest of all types of tax audits, in this audit, the IRS will send you a letter and ask for information regarding certain area of ​​your tax return.
• The second type of audit is known as office audit. In an audit like this, the auditor will ask a number of detailed questions and possibly consume your entire day, if the IRS requires it, they will allow you more time to gather and send the required details.
• The third type of audit is a field audit that is slightly more inclusive than an office audit. In this type of audit, the IRS visits the taxpayer's home or their home at their workplace. They can ask the tax payer to check other things; They will not be limited to specific items.

Penalty

If a taxpayer fails, the tax is audited with the following penalty:

• 0.5% of total sales, turnover or gross receipts
• Rs 1,50,000