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Tax Audits

VKPG > Service > Tax Audits

Tax Audits (Income Tax Audit)

Audit refers to an official inspection or unbiased investigation of a firm’s or companies financial statements or reports as well as the production of reports, typically by an autonomous body. There are various types of audits under different laws such as company audit, statutory audit, cost audit, stock audit, etc. Similarly, an audit compensated under Income Tax is termed ‘Tax Audit’. A tax audit is an inspection or study of accounts of any firm or trade executed by taxpayers. It eases the income estimation for filing the ITRs.

Objectives of Tax Audit:

* Tax audits are conducted with a few predetermined objectives which are as follows:

* To ensure total maintenance and correctness of records of tax accounts of the party along with the approval on the same by the auditor.

* To report important information such as tax shrinkage, agreement of various provisions of income tax law, and so on.

* To report the observations or discrepancies caught by tax auditor after a methodical examination of the records of account.

* To enable tax officials ensure the accuracy of income tax returns filed by the firm or business.

* To estimate and verify the total income and ease the claim for deductions.

 

Mandatory Subject to Tax Audit

Business

                           Category                     Threshold Limit
Engaged in business but not opted for presumptive taxation scheme. Total sales, gross receipts or turnover surpasses 1 crore in the Financial Year.
Enagaged in business having cash receipts  less than 5% of total receipts and cash payments less than 5% of total payments. Total sales, gross receipts or turnover surpasses 10 crore in the Financial Year.
Engaged in business qualified for presumptive taxation u/s44AD Notifies taxable income less than specified limit under the presumptive tax scheme and has income surpassing the basic TLV (threshold limit value).
Engaged in business which is notifying profits in accordance with presumptive taxation scheme u/s44AD If the total sales, gross receipt, or turnover is less than 3 crore in the FY, then tax audit will not be applicable to such businesses.
 

Profession

                                 Category                        Threshold Limit
Practicing a profession Total gross receipts surpass 50 lakh in the FY.
Practicing a profession qualified for presumptive taxation u/s44ADA 1.Claims profits less than the specified limit   under the presumptive taxation scheme. 2. Income surpasses the maximum value that does not attract income tax.

Forms Required for Tax audit:

Form 3CB: For tax audit reports prescribed u/s 44AB of the IT Act, 1961,

*Form 3CD: To report Form 3CB and the specified details

*Form 3CA and Form 3CD: Form 3CA is the appropriate form when a taxpayer wants to get the accounts audited under any law except u/s 44AB, the prescribed information needs to be reported in the Form 3CD.

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