TAX AUDIT is review of
accounts of the business organization or an individual in respect of income and
deductions. Section 44AB under Income tax contains the provision for
conducting the TAX AUDIT which aims to ascertain the compliance of various
provisions of the Income-tax Law and the fulfillment of other requirements of
the Income-tax Law. The audit is conducted by the chartered accountant and his
observations are recorded in tax audit report.
Who
are Entitled to Get Tax Audited
|
AUDIT
FOR BUSINESSES
|
Any person carrying on a business whose total sales, turnover or gross receipts
exceeds
Rs.1 crore in previous year
|
AUDIT
FOR PROFESSION
|
Any person carrying on whose gross
receipts exceeds
Rs. 50 lakhs in previous year
Objectives
of Tax Audit
Tax audit is being conducted to
achieve the following:
i.
A
proper system ensures maintenance of its record of income, revenue, expense etc
in a correct and verified manner.
ii.
Tax
audits minimize the risk of frauds and
other illegal practices
iii.
In
case of discrepancies, there is an ease of methodical examination of the
well-maintained record.
iv.
It also facilitates the
implementation of tax laws during routine verification since proper
presentation of accounts saves time of the assessing officer
Tax on Presumptive Basis
(w.e.f., a.y. 2017-18)
To give relief to small
taxpayers from this tedious work of maintenance of books of accounts and also
from getting the accounts audited, the Income-tax Act has framed the
‘presumptive taxation scheme’ for person engaged in business or profession
which we will discuss below.
|
PRESUMPTIVE
TAXATION SCHEME FOR BUSINESSES
|
Eligible person whose turnover is
upto 2 crores can opt for presumptive taxation scheme where
income is computed on
presumptive basis at the rate of 8% of the turnover of the eligible business
for the year.
However, in order to promote digital transactions, if
turnover is received through digital payments income shall be computed at the rate of 6% instead
of 8%w.e.f., the A.Y. 2017-18
Note:
The presumptive taxation scheme can be adopted by
following persons :
1) Resident Individual
2) Resident Hindu Undivided Family
3) Resident Partnership Firm (not
Limited Liability Partnership Firm)
Except
the following
1)
Person engaged in Business of plying, hiring or leasing of goods
carriages
2)
Person carrying agency business.
3)
Person who is earning income in nature of commission
or brokerage
|
PRESUMPTIVE
TAXATION SCHEME FOR PROFESSION
|
Eligible person whose turnover is
upto 50 lakhs crores can opt for presumptive taxation scheme where
income is computed on
presumptive basis at the rate of 50% of the turnover of the profession for the
year.
Note:
A person resident in India who is engaged in
following professions can opt for presumptive taxation scheme
1) Legal
2) Medical
3) Engineering or architectural
4) Accountancy
5) Technical consultancy
6) Interior decoration
7) Any
other profession as notified by CBDT
CONSEQUENCE OF
VOILATING PRESUMPTIVE TAXATION SCHEME OF SECTION
44AD
If a person opts for
presumptive taxation scheme then he is also require to follow the same scheme
for next 5 years. If he failed to do so, then he will not be eligible to claim
benefit of presumptive taxation scheme for him for next 5 years.
Further, he is required
to keep and maintain books of account and he is also liable for tax audit if
income exceeds the exemption limits as per section 44AB from the AY in which he
violates th4e provison of presumptive taxation scheme
Due
Date for Getting Account Audited
A person required to get audited
should get its account audited on or before 30th September of
relevant assessment year by submitting tax audit report to the Income-tax
Department prepared
by chartered accountant
Penalty
for Non-Compliance
If any person who is
required to comply with section 44AB, does not do so, as per the
prescribed manner, a penalty may be imposed by the Assessing Officer which may
be:
(a) 0.5% of the total
turnover, sales or gross receipts, in business, or of the gross receipts in profession
of an individual, in such year or years as under scrutiny, OR
Whichever is lower
However, Income tax
also contains the provision that if there is a reasonable and bonafide cause penalty
may not be imposed.
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