What is Tax Audit of an Enterprise?

 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:

Sr. No.

Particulars

Limit

 

Individual not opting for presumptive taxation scheme

Total sales, turnover or gross receipts > 1Crore.

 

Individual opting for presumptive taxation scheme

Total sales, turnover or gross receipts >2 Crore

 

individual, who is a professional

Gross receipts > Rs 50 lakhs

 

Business eligible for presumptive taxation under Section 44AE*, 44BB* and 44BBB*

Claims profits or gains lower than the prescribed limit under respective presumptive taxation scheme

 

profession eligible for presumptive taxation under Section 44ADA

Claims profits or gains lower than the prescribed limit under presumptive taxation scheme and income exceeds maximum amount not chargeable to tax

 

Carrying on the business and is not eligible to claim presumptive taxation under Section 44AD due to opting for presumptive taxation in one tax year and not opting for presumptive tax for any of the subsequent 5 consecutive years

If income exceeds maximum amount not chargeable to tax in subsequent 5 consecutive tax years from the tax year where presumptive taxation is not opted for

 

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:

1.     It makes income computation more efficient

2.     Correct liability is reached while Audit.

3.     It acts as an eye opener for fraudulent practices.

4.     Books of accounts of the company/entity are properly maintained.

5.     Documentation is kept proper all the time, keeping in mind the preparedness for tax Audit.

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