Income Tax Audit, as the name suggests, is intended at assessing whether an individual or a company has filed their income tax returns, deductions, and expenditures as well other rules that are specified by the Income Tax Act accurately and fairly.
The process of tax auditioning streamlines the computation of tax returns for individuals and companies. Chartered Accountants of the agencies in question who perform tax audits have to submit Form 3CA or Form 3CB as well as Form 3CD as an audit report.
Objectives of Tax Audit
● A study of the accuracy of income tax returns filed in a given year by a company or an individual as well as maintenance of the said records by Chartered Accountants.
● Disclosure of findings by the tax auditor after a meticulous study of accuracies and inaccuracies in tax returns filed.
● Disclosure of important statistics about compliance, tax depreciation, etc., as stated by the laws around income tax.
● Inspects frauds and malpractices in filing tax returns
Categories of taxpayers for whom tax audit is mandatory
● A business owner who has not utilized a presumptive taxation scheme, with gross turnover or total sales exceeding ₹1,00,00,000.
● A business owner who has utilized a presumptive taxation scheme under Section 44AD of the Income Tax Act with gross income or turnover exceeding ₹2,00,00,000.
● A taxpayer whose business, which is qualified for presumptive taxation under the sections 44AE, 44BB, 44BBB, claims profits that don’t exceed the prescribed limit under the concerned presumptive taxation scheme.
● A business owner who is not qualified to claim presumptive taxation scheme under section 44AD due to opting for it in a certain assessment year and not for any of the 5 consecutive years. This is only relevant when her/his gross annual income exceeds the maximum amount not chargeable to tax in the following 5 consecutive assessment years.
● An employee whose gross receipts exceeds ₹50,00,000.
● An employee who is eligible for a presumptive taxation scheme and the income exceeds the maximum amount not chargeable to tax.
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