Let understand the term 'Tax Audit'
In a simple language, word ‘Audit’ stands for inspection of account of a particular organization by an independent professional. Process by which verification of the books of accounts of an assessee is carried out to validate the income tax computation and compliance with the laws of Income Tax is known as Tax Audit. Certified Chartered Accounts should regulate the process of tax auditing. The main purpose of this tax audit process is to review accounts of any business / profession to calculate filing of income tax. For companies, appointing a tax auditor is must to carry their process auditing.
What are the Objectives of Tax Audit?
Government of India now made it mandatory to file tax audit to achieve following set of objectives
- To ensure all the businesses maintain the books of accounts and all other revenue & expense records properly.
- To ensure total income and claim deduction filed by businessmen.
- Restrict the chance of fraudulent practices.
- Save the time of Assessing officer handling tax audit verifications.
Eligibility for Tax Audit
Section 44AB of the Income Tax Act, 1961 defines eligibility for the tax audit. Businesses and professionals belonging to following criteria need to follow income tax audit procedures and get their accounts audited
Businesses
As per the section 2(3) of the income tax act, 1961, “business” is “any trade, commerce, manufacturing activity, or any adventure in the nature of trade, commerce and, manufacture”. Thus business that crossed Rs. 1 Crore in the previous year as per their total sales turnover records, must get their accounts audited compulsorily.
Professionals
Professionals like Architects, Accountants, Engineers, Artists, Legal Professionals, Medical Professionals, Technical Consultants etc. need to get their tax audit performed as per section 6F of Income Tax Act, 1961, if their gross annual receipts extend over Rs. 50 Lakh in total.Tax Audit Due Date
To make tax audit process simpler, Income Tax Departments specified the forms to furnish the information about business or profession.
- Form 3CA – It is known as Audit Form.
- Form 3CD – This form is for describing statement of relevant particulars.
Penalty for Non-Compliance
A taxpayer will be penalized if they failed to submit their tax audit report before stipulated time. Penalty of 0.5% of the turnover or gross receipts would be penalized which is subjected to maximum penalty of Rs. 1,50,000.
