Income Tax Audit Under Section 44AB
Tax audit is required to be done u/s 44AB of Income tax act if the turnover of the assessee crosses a certain specified limit in a financial year from business or profession.
Assessee means a person who pays tax and is required to file his Income tax return for Business owners or Individual itself.
Objective of tax audit is to ensure that the assessee is not underreporting his income or showing fictitious losses to claim the same in future. It ensures that the tax calculation is done right and all the provisions of Income tax are complied with.
A Chartered Accountant is authorised to sign your tax audit report and submit it to the IT department.
When Tax Audit is applicable?
If your business turnover exceeds 1 crore (10 crore in case of complete digital transactions) then you are required to get your tax audit done through a CA. The limit is 50 lacs in case of professional income.
Further, if you were filing your ITR u/s 44AD (presumptive scheme) in the previous years and now you are jumping into normal scheme showing profit less than 8% of the turnover (6% in case of complete digital transactions), then also you are compulsorily required to get tax audit done.
It is also applicable if you are claiming profit lower than the prescribed limit under presumptive taxation scheme u/s 44AE, 44BB, 44ADA or 44BBB.
What constitutes a Tax Audit Report?
Tax Audit report constitutes form 3CA/3CB and 3CD.
Form 3CA is applicable if a person is required to get Audited under any other law also. Like companies are required to get audited under companies act too.
Form 3CB is applicable when he is not required to get audited under any other law.
3CD is applicable in both the cases and it is a comprehensive report that includes 44 pointers under which an auditor report his observations that he finds during the audit.
Last date of filing Tax Audit Report?
Last day of Income tax return for Business owners or Individualis 30th September. However, this year government has extended the time limit up to 15th January 2021.
Process of Tax Audit Report filing
First, an assessee needs to appoint a Chartered Accountant to do his tax audit. Once a CA accepts his appointment, the assessee is required to add the CA in his income tax portal login by using my chartered accountant section in income tax website.
- Once CA accepts the request, assessee then needs to assign him form 3CA/3CB – 3CD as applicable from the website itself.
- CA thereafter performs the tax audit based on the documents provided, prepare tax audit report and upload the same through the income tax website.
- Assessee needs to then accept the audit report in the website and can proceed to file his ITR afterwards.
- In all the above process, the digital signature will be required by assessee and CA for submitting the forms.
What are the Documents needed for Tax Audit?
List of documents required for tax audit are:
- Name and address of person
- Addresses of all the branches of the business
- PAN and Aadhaar details
- GST, VAT, Excise, Custom registration details
- Business structure detail
- Copies of deeds, agreements and other legal documents defining constitution of business
- Detail regarding nature of business
- Books of accounts maintained including bank book, cash book, purchase and sales register, journal register
- Bank Statements
- List of related party transactions
- Location where books of accounts is maintained
- Details of closing stock and method of valuation
- Details of speculation gain/loss during the year
- Details of previous year losses
- Details of depreciation charged during the year
- Details of TDS deduction and TDS return filings
The above is the broad requirement list applicable to normal size businesses. Many of the things above may not be applicable to some small assesses.
Many other documents may be required by your Chartered Accountant based on the size, nature and deduction claimed by you in the business.
If you think based on the above that Income tax audit is applicable to you, you can consult a chartered accountant for more clarity on the same. If applicable, get you tax audit done before the due date to avoid any hassle in the future.
Wish you a Happy Tax Season!
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