Description of Tax audit limit and due date

Have you ever heard about the term audit or tax audit? Who does this work tax audits? Take a deep breath we will answer all your questions one by one. It basically involves the verification of the accounts maintained by the assessee. Auditors validate the Income the tax computation and compliance with the laws of income tax. A certified chartered accountant carries out the auditing of accounts.

Further, we will discuss the tax audit limit, audit due date etc.

What do you understand by tax audit limit?

There are certain tax audit procedures and tax audit limit, whose provisions are mentioned under the section 44AD of the Income Tax. Let’s take a look at what are the limits and basically who all have to undergo Tax Audits.

In accordance with the Section 44AB, a tax audit is required by the business entities, working professionals, and person who are already enrolled under the Presumptive Taxation Scheme.

In the case of Business

If you operate a business in India, and your total turnover sales or gross receipts are more than Rs. 1 crore in any of the previous year, then there would be a requirement of Tax Audit.

In accordance with section 2(3), business is defined as any trade, commerce, manufacturing activity or any adventure or concern in the nature of trade, commerce, and manufacture.

In the case of a Profession

If you are a working professional and your gross receipts in that profession are more than Rs. 50 lakhs in any of the previous year, then there would be a tax audit.

If you are wondering, what all professions are involved in this, there is a list mentioned below-

1.       Engineer

2.       Legal Professionals-Advocate or lawyer

3.       Technical consultant

4.       Accountant

5.       Technical Consultant

6.       Medical Professionals-Doctor, Physiotherapist etc

7.       Architect

8.       Authorized Representative

9.       Interior Decorator

In the case of the Presumptive Taxation Scheme

There is a presumptive taxation scheme available under section 44AD, if you are enrolled under this scheme or the annual turnover or sales exceeds Rs. 2 crore then there would be a requirement of a tax audit.

You have to obtain the tax audit report if you are already enrolled under the presumptive taxation scheme (Even if the profits made by you, are lower than the mentioned amount under the presumptive taxation scheme).

Hope you have an idea by now, regarding who has to obtain the tax audit reports and what are their limits.

Have you taken a note of next due date of tax audit reports? 

The tax audit due date for 2019 has not been announced yet by the Income-tax department. But still, just to give an idea; for the year of 2018, the tax audit due date was 30^th September.

Keep yourself audit ready beforehand.

For more information, please contact Enterslice.

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Who Is Covered Under Tax Audit

According to section 44AB of the Income Tax Act, following are mandatorily required to get their accounts audited:

·         An individual engaged in business with Rs.1 crore and above as the annual turnover of business.

·         An individual engaged in any sort of profession with income receipts in a year aggregated to be Rs.50 lakhs and above.

·         An individual who, under Section 44AD, qualifies for the presumptive taxation scheme but at a later stage claims that the profits for the business are lower than the profits calculated earlier as per the presumptive taxation scheme. It is also applicable in case, the income on record is calculated to be more than the amount which is not chargeable for taxation or is tax-free.

·         If the assessee qualified under the presumptive taxation scheme, after a specific period opts out of it, will lose the ability to go back to the said taxation scheme for a continuous period of 5 assessment years after opting out.

·         An individual who qualifies to choose the presumptive taxation scheme of selection under Section 44AE but then claims that the profits for such business are lower than the profits calculated in accordance with the presumptive taxation scheme of section 44AE.

·         An individual who qualifies to choose the presumptive taxation scheme of selection under Section 44BBB but then claims that the profits for such business are lower than the profits calculated in accordance with the presumptive taxation scheme of section 44BBB.

You can submit your tax audit report easily with the help of Enterslice.

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Things to know about the Tax Audit

Audit is all about review. Tax audit involves the process of reviewing or examining of the books of accounts of a business entity to confirm the income tax computations, deductions and other such financial calculations have been done in compliance with Income Tax laws of the country.  Tax audit enables easy income tax computation as well as Income Tax Return filing easy. The Tax Audit limit is regulated by Section 44D of the Income Tax Act.  Person carrying business or in a profession have to be get their books of accounts audited compulsorily under Section 44AB pertaining to certain tax audit applicability.

The tax audit applicability categories the following persons who have to undergo the audit process on a mandatory basis:-

1.      Persons carrying on business with a turnover or aggregate sales exceeding 1 crore, but have not opted for Presumptive Taxation Scheme.

2.      Persons carrying out business with total or aggregate sales or turnover exceeding 2 crore and have opted for the Presumptive Taxation scheme

3.      Professionals whose gross receipts exceed Rs. 50 lakh annually

The presumptive taxation scheme under Section 44AD mentions that tax audit is not required for persons who are enrolled for the scheme and have a turnover of less than INR 2 crore annually.

Purpose of Tax Audit

·         The tax audit process ensures that the books of accounts have been maintained correctly and as per Income Tax provisions.

·         Tax audit brings out discrepancies as pointed out by the tax auditor after a thorough examination of the books.

·         Since the tax audit report follows a prescribed format, it saves time of tax authorities in checking out minute details and correctness of the information as filed in ITR.

Tax Audit Report Format

The audit report is required to be furnished either through –

1.      Form 3CA – this report is applicable for persons carrying out business or profession who need to get their books of accounts mandatorily audited as per the Act.

2.      Form 3CB – this form is required to be furnished by persons carrying out business or profession for whom it is not compulsory to get their books audited under the Act.

3.      Form 3CE – is applicable for Non-residents and foreign companies that receive any form of payment or fees for technical services or royalty from the Government of India.

Tax audit applicability has a legal validation only if submitted by a Chartered Accountant or a firm of Chartered Accountants or a Statutory Auditor. The tax audit report needs to be signed by the accountant or the auditor who has performed the audit.

For e-filing the online tax audit form, the report needs to be signed by the accountant or the auditor as well as his membership number needs to be mentioned alongside. The audit report first needs to be submitted to the concerned person or taxpayer digitally to get his approval before the online tax audit is filed electronically.

There is a tax audit limit for Chartered Accountants too. They cannot undertake more than 60 tax audits in a year.

The penalty for not getting the books of accounts audited for persons who are compulsorily required to get the audit done is 0.5% of the turnover or gross receipts, with a maximum limit of Rs. 1.5 lakh. The penalty is levied under Section 271B of the IT Act. However, the person is given a chance to give reasons for non-compliance, and if found acceptable, no penalty is imposed.

The audit report needs to be obtained before or by 30^th September of the said assessment year. Only the 3CE report has a due date of 30^th November of the said assessment year.  More info visit http://enterslice.over-blog.com/2018/10/things-to-know-about-the-tax-audit.html

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Detail Explanation about Tax Audit

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 30^th 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

(b) Rs. 1,50,000.

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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Tax Audit Process

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 crorein previous year

AUDIT FOR PROFESSION

Any person carrying on whose gross receipts exceeds Rs. 50 lakhs in previous year

Turnover Limit for Audit

(With effect from the finance act 2017)

S.No	Business		Profession
	opting Presumptive Income Scheme	Not opting Presumptive Income Scheme	opting Presumptive Income Scheme	Not opting Presumptive Income Scheme
	2 crores	1 crores	50 lakhs	50 lakhs

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 audit 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

Due Date for Getting Account Audited

A person required to get audited should get its account audited on or before 30^th September of relevant assessment year.

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

(b) Rs. 1,50,000.

Whichever is lower

However, Income tax also contain the provision that if there is a reasonable and bonafide cause penalty may not be imposed.

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Tax Audit Report

Submitting the Tax Audit Report is the final step which requires to be performed in an orderly manner.   After the audit is thoroughly done, the auditor submits a detailed audit report with opinions and inferences of the financial statements in a format prescribed by the Institute of Chartered Accountants of India. The report must not contain any misstatements, ambiguous or misleading statements.

The audit report first mentions the legal name of organization/individual and the details of the financial statements being audited. Every tax audit report along with other headings as per format, must have these three heads: ‘Management’s Responsibility for the Standalone Financial Statements’, ‘Auditor’s Responsibility’ and ‘Report on Other Legal and Regulatory Requirements’. The auditor, in case of any negligence brought forward, may be held accountable. Thus, the auditor must be coherent in his opinions and must act independent of any factors.

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

      v.          Also, be noted that failure to comply with the Income Tax rules attracts penalty, thus tax audits for compliance are a wise choice

Penalty for Non-Compliance

According to section 271B of the Act, 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

(b) Rs. 1,50,000.

Whichever is lower

Though, there may not be penalty imposed a reasonable and bonafide cause for such failure is brought forward.

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