Self-employed Indian citizens must perform a tax audit of their financial accounts. However, one must meet specific conditions to become eligible for such audits. If you qualify for the same, hiring an experienced chartered accountant should simplify your income tax audit process. Read on to know the intricacies related to this procedure and the requirements for every taxpayer.
A tax audit can be referred to as a mere official inspection that is conducted by certain categories of businesses or individuals. Businesses with a turnover of a specified amount need to get the books of accounts audited under Section 44AB of Income Tax Act, 1961.
The main objective of this tax audit process is to ensure compliance with applicable income tax laws. The procedure also helps in validating the income tax computation that the assessee has mentioned in the ITR.
Section 44AB of IT Act consists of all the relevant provisions related to tax audits. Here, there is a mention of rules and regulations that need to be fulfilled by the taxpayer while maintaining financial records and books of accounts. The key purpose of introducing this particular Section was to reduce fraudulent practices.
Before business owners or professionals conduct an income tax audit, they need to be aware of the aspects of Section 44AB Income Tax Act.
The following are some of the key objectives for carrying out an income tax audit:
Tax audit is necessary for almost every profession or business except for those falling under presumptive taxation. This is applicable under Section 44ADA, 44AD, and 44AE of Income Tax Act, 1961. Additionally, businesses having revenue below specific threshold limits are also not required to get such tax audits done.
Other than these categories, here are some individuals who need to maintain their books of accounts or conduct a tax audit under Section 44AB:
Here is the complete process to file a tax audit report under Sec 44AB of Income Tax Act:
Step 1: The procedure starts with the assigned chartered accountant presenting the tax audit report online. For this, the accountant has to make use of his/her login credentials. Note that on the login platform, the assessee must state all the details regarding his/her assigned chartered accountant.
Step 2: The auditor will be uploading the tax audit report on the portal. Upon receiving it, the taxpayer has to either accept or reject the audit report using the same website. Note that such a process will be repeated in case the assessee finds it necessary to get the tax audit done once more, and reject it.
Remember, the filing of income tax audit report should be done before the pre-decided due date of filing ITR. Generally, this date for assessees involved in international transactions is November 30 of the following AY, while for other taxpayers, it is September 30 of the following AY.
For the tax audit process under Section 44AB, each taxpayer must submit certain forms, as per Rule 6G of ITA. Here is a list of the forms:
The following rules govern tax audit as per Section 44AB of Income Tax Act:
There are certain penalties applicable under section 271B of Income Tax Act to business persons or professionals who do not carry out tax audits. For instance:
An income tax audit indicates that a professional or a business owner is transparent with his/her tax payments, and there is no chance of tax evasion. The chartered accountant you hire to conduct this audit will create an accurate report and share it with the IT department.
Ans: You need to hire a chartered accountant to initiate an income tax audit. Businesses can also hire an entire firm of CAs, when necessary. However, you should remember that a CA can perform up to 60 such audits every year.
Ans: As per provisions of Income Tax Act, tax audits can be conducted under 6 specific sections. These include:
Ans: Section 44AA outlines the circumstances where a business’s books of accounts need to be maintained by assessees. On the other hand, Section 44AB contains the specific situations in which a professional or a business owner needs to create an audit report.
Ans: According to Income Tax Act, one can classify tax audits under 7 distinct heads. These are:
Information systems audit
Ans: The only situation in which the business management can remove a tax auditor is when he/she delays the report submission. The delay must be to such an extent that the business can no longer submit its report within the specified time limit.
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