ACCOUNTING & TAX

INCOME TAX AUDIT

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OVERVIEW

INCOME TAX AUDIT

The term “tax audit” refers to the inspection and verification of the taxpayer’s financial records to determine if they comply with the terms of the Income Tax Act of 1961. According to the government, every taxpayer in India must now comply with tax audits. If the amount paid in taxes surpasses a certain threshold, tax audits on yearly gross revenues and turnover are now required under the Income Tax Act of 1961. A chartered accountant performs the tax audit by Section 44AB of the Income Tax Act of 1961.

SCOPE

SCOPE

For the following assesse, a tax audit is required under Section 44AB:

Business Gross Turnover – 10 Crore per Annum

According to Section 44AB of the Income Tax Act, an assesse is required to submit to an audit if their gross yearly revenue exceeds ten crore.

Annual Gross Income from Profession – 50 lakhs

The Assesse is qualified for this procedure if their profession’s annual gross income exceeds INR 50 lacs.

Outcomes of a Tax Audit

Income Tax audits completely depends on annual turnover irrespective to Individual/Proprietorship, Company, Partnership Firm, Association of Person, Hindu Undivided Family and Local Authority.

SUBJECT TO A TAX AUDIT

WHO IN INDIA IS SUBJECT TO A TAX AUDIT?

In accordance with the law, certain groups of people are required to take part in an income tax audit.

ESSENTIAL DOCUMENTS

ESSENTIAL DOCUMENTS REQUIRED FOR TAX AUDIT

Documents Required for Preparation of Tax Audit Report

Documents Required for Tax Audit

PROCEDURE

PROCEDURE OF TAX AUDIT

Choosing a tax auditor

The choice of a Tax auditor is the initial stage. The business’s chartered accountant or any IRS employee can serve as the auditor.

Submission of the Form and Documents to the Auditor

The required form must then be submitted together with the mandatory paperwork to the tax auditor.

Document verification by Auditor

After the taxpayer provides the required documentation, the auditor checks all the pertinent specifics and conducts vouching verification of all documents. The auditor can also request for a sample testing or further documentation to clarify the taxpayer’s transaction.

Preparing an audit report

The auditor then creates an audit report after checking all the papers. The audit report serves as evidence of the taxpayer’s compliance with tax legislation.

SCHEME

SCHEME

Scheme of Presumptive Taxation—Section 44AD

Scheme of Presumptive Taxation—Section 44ADA

TAXKEY ASSIST WITH TAX AUDIT

HOW CAN TAXKEY ASSIST YOU WITH A TAX AUDIT?

Choosing a tax auditor

The complete Tax Audit will be assisted and carried out by a team of knowledgeable and experienced consultants. By offering services like proper analysis of laws and accounts and answering any questions regarding tax audits, Taxkey assists its customer in executing the tax audit.

We will create appropriate documentation and analyzing assertions and reports.We ensure that the business adheres to the relevant tax standards and conducts an analysis of its working procedures.

Assisting you during the Tax Audit process are skilled specialists that Taxkey has on staff. Our Experts will help you throughout the audit process and other associated services. We will also ensure your job is completed efficiently and on schedule. Don’t hesitate to get in touch with our knowledgeable and qualified staff at Taxkey with any questions about Tax Audits and related services.

FAQS

FAQS

  • In a fiscal year, duty drawbacks obtained following export sales are included in turnover.
  • It is considered a part of turnover in a financial year, or Advance received and forfeited from customers, and if excise duty is included in turnover, it should be debited in the profit and loss account.
  • Income earned out of interest from income by money lenders or through foreign fluctuation income by an exporter is also considered a part of turnover in a financial year.
  • Purchase or Sale of Fixed Assets
  • Rental revenue
  • Residential or commercial property income
  • Interest income, and receipts for the repayment of expenditures obtained by selling the assets kept as investments.

The tax auditor submits their report in the designated format, which will be Form 3CA or Form 3CB, and includes the following information:

  • When a person engaged in business or profession is already required to have their accounts audited under any other legislation, Form 3CA is provided.
  • When a person is engaged in business or profession and is not required to have his accounts audited by any other legislation, Form 3CB is provided.

Anyone who is covered by section 44AB must have their accounts audited and acquire the audit reports on or by September 30 of that specific year, which is the deadline for filing the income tax return.

Note: For International transactions, the due date will be November 30 of the specific year.

Any taxpayer who refuses to have their taxes audited will be subject to the following penalty:

  • INR 1,50,000
  • 0.5% of total sales, revenue, or gross income

Note: If the reasons are acceptable, there are chances for non-levying penalty.

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