Tax Audit under section 44AB
Tax audit is the examination of a business or individual official document by the Internal Revenue Service (IRS) or state tax authority. The purpose of the Tax Audit is to make sure that books of accounts are maintained in accordance with the provisions of the Income Tax Act. Tax Audit also ensures that the Accounts are properly being conferred to the Assessing Officers once needed. The tax agencies determine and resolve remunerator errors.
Objectives of Tax Audit:
Objectives of Tax Audit are as follows:
• Ensure correct maintenance and correctness of books of accounts and certification of identical by a tax auditor.
• Reporting observations/discrepancies noted by tax auditor once an organized examination of the books of account.
• To report prescribed information like tax depreciation, compliance of assorted provisions of taxation law etc.
All these modify tax authorities in confirmative the correctness of tax returns filed by the payer. Calculation and verification of total financial gain, claim for deductions etc. additionally becomes easier.
Eligibility Subject to Tax Audit:
Following classes of taxpayers are needed to induce tax audit done:
Category of person
|Carrying on business (not choosing presumptive taxation scheme*)
In case of loss from carrying on of business and not choosing presumptive taxation theme
Taxpayer’s financial gain prodigious basic threshold limit, however, payer incurs a loss from carrying on a business (not choosing presumptive taxation scheme)
|Total sales, turnover or gross receipts exceed Rs 1 Crore
Total sales, turnover or gross receipts exceed Rs 1 Crore
Even just in case of loss from the business once sales, turnover or gross receipts exceed Rs.1 Crore, the payer is subject to audit
|Carrying on business (opting presumptive taxation theme beneath section 44AD
Carrying on business (presumptive taxation theme beneath section 44AD applicable) and having a business loss however with financial gain prodigious basic threshold limit
|Declares non-exempt financial gain below the bounds prescribed beneath the presumptive tax theme and has financial gain prodigious the essential threshold limit|
|Carrying on business (opting presumptive taxation theme beneath section 44AD and having a business loss however with a financial gain below the basic threshold limit||Tax audit not applicable|
|Carrying on profession||Gross receipts exceed Rs. fifty lakhs|
|Carrying on business eligible for presumptive taxation beneath Section 44AE||Claims profits or gains not up to the prescribed limit beneath presumptive taxation theme|
|Carrying on the profession eligible for presumptive taxation beneath Section 44ADA||Claims profits or gains not up to the prescribed limit beneath presumptive taxation theme and financial gain exceeds most quantity not guilty to tax|
|Carrying on the business and isn’t eligible to say presumptive taxation beneath Section 44AD thanks to choosing presumptive taxation in one tax year and not choosing presumptive tax for any of the subsequent five consecutive years||If financial gain exceeds most quantity not guilty to tax within the subsequent five consecutive tax years from the tax year wherever presumptive taxation isn’t opted for|
If a person has to get his Accounts Audited under Any Other Law:
In such cases, the remunerator need not get his accounts audited once more for taxation functions. It’s comfortable if accounts are audited beneath such alternative law before the due date of filing the return. The remunerator will furnish this prescribed audit report beneath taxation law.
Tax Audit Report
Tax auditor shall furnish his report in an exceedingly prescribed kind that may be either kind 3CA or kind 3CB where:
• Form No. 3CA is equipped once someone carrying on business or profession is already mandated to induce his accounts audited beneath the other law.
• Form No. 3CB is equipped once someone carrying on business or profession isn’t needed to induce his accounts audited beneath the other law.
In case of either of the same audit reports, tax auditor should furnish the prescribed particulars in kind No. 3CD, that forms a part of an audit report.
How and when tax audit report shall accounts?
The tax auditor shall furnish tax audit report on-line by victimization his login details within the capability of ‘Chartered Accountant’. Remunerator shall additionally add CA details in their login portal. Once the tax auditor uploads the audit report, same ought to either be accepted/rejected by remunerator in their login portal. If rejected for any reason, all the procedures have to be compelled to be followed once more until the audit report is accepted by the remunerator.
Due Date for Filing Tax Audit Returns
You must file the tax audit report on or before the due date of filing the return of financial gain. It is 30 November of the subsequent year in case the taxpayer has entered into an international transaction and 30 September of the subsequent year for other taxpayers.
Penalty for late filing of Tax Audit Returns
If any remunerator who is needed to induce the tax audit done however fails to try, therefore, the smallest amount of the subsequent is also levied as a penalty:
1. 0.5% of the entire sales, turnover or gross receipts
2. Rs 1, 50,000
Advantages of Filing Tax Audit Returns
1. Tax Audit helps the government to avoid tax theft by companies.
2. Ensures that the total estimated tax is achieved by the tax department.