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Tax Audit
Tax Audit
The term ‘audit’ refers to a check, review, verification or inspection of a record, transaction, account etc. A tax audit is the process of verification and inspection of the accounts of a taxpayer to confirm their adherence to the provisions of the Income Tax law. The class of taxpayers listed under this section compulsorily has to get their accounts audited by a Chartered Accountant. Tax audit helps in review of transactions related to income, expenses, deductions, and taxes of the organization.
In the case of professionals:
If your gross earnings are more than 50 lakhs in a financial year, tax audit is required.
In the case of people carrying on a business: If your turnover or gross earnings are more than 1 crore in a financial year, tax audit is required.
The threshold limit of Rs 1 crore for a tax audit is proposed to be increased to Rs 5 crore with effect from AY 2021-22 (FY 2020-21) if the taxpayer’s cash receipts are limited to 5% of the gross receipts or turnover, and if the taxpayer’s cash payments are limited to 5% of the aggregate payments.
Importance of Tax Audit
- A Tax Audit will maintain the books of accounts and all other records regarding the revenue and expenditure properly.
- Computation of tax and deductions becomes easy with the auditing.
- Audit is a great way to make sure the credibility, fairness, and transparency of the accounting reports.
- An Audit builds up the reputation of the company.
- Government authorities accept audited statements as true and fair for the purpose of taxation.
- Auditors can give concrete suggestions regarding the improvements of business on the basis of their findings in the record.
- List of assets on which depreciation under Income Tax Act is claimed.
Due Date & Penalty
A taxpayer has to obtain the audit report on or before 30th September of the relevant Assessment Year. Assessing Officer may impose penalty u/s 271B if the taxpayer doesn’t get his accounts audited or file the audit report. A minimum penalty can be 0.5% of the total sales, turnover or gross receipts, which can go up to Rs. 1, 50,000.
Documents required for Tax Audit
- Pan Card
- Aadhar Card
- Bank Statements (Savings, Current & Loan Statements)
- Book of Accounts: Cash Book, Purchases Book, Sales Book, Expenses Voucher etc.
- List of Books of accounts
- Details of the Fixed Assets & Capital Assets
- Noc from last Auditor (If books of a/c is audited in last year)
- Extracts or copies of important legal documents. (if any)
- Copies of audited financial statements for previous year (If audited).
- Letters of representation or confirmation received from the client.
Time duration
It can take up to 4-5 working days in order to Income tax Audit.
Enquiry Person Details
Tax & Registration
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