What is Income Tax Audit
Tax Audit Services is a fundamental term for business in India. A tax audit is a process to check whether a business obeys the rules set by the Income Tax Act of India. Thus Tax Audit services are considered to be vital for every business. In this article, the point of discussion will be on Tax Audit Services Online in India.
What is section 44AAB of income tax Act?
The first thing that we need to know regarding tax audits is what is a tax audit? Inspection of the accounts of a company by a professional chartered accountant is known as Tax Audit. Section 44AB of Income Tax Act, mentions the regulations for the Tax audit of a company or a firm. This section was added in order to make sure that a business is conducted by providing precise information about his taxes, deductions and income.
Tax Audit Applicability
Tax audit applicability depends on two cases,
For professions
- If the gross income is more than Rs 50 lakhs in a financial year.
- The profession is applicable for presumptive taxation. Moreover, the claimed profit was lower than that of the stipulated limitation and income exceeds the maximum amount up to nonchargeable income tax.
For business
- If the gross income or turnover is more than 1 crore.
- If the business is suitable for assumptive taxation (section
44BB, 44AE, 44BBB) and the business also claims that gains are lower than that
of the stipulated limit.
- The business is eligible for presumptive taxation according
to Section 44AD of the Income Tax Act.
- It is declared that the taxable earning has been below the
limitations that are specified by the assumptive taxation and the income
exceeds the threshold limit.
- The gross receipts of the business exceed 2 crores in a financial year.
Tax Audit limit
The Tax Audit Applicability under Section 44AB of the Income Tax Act. therefore as per Section 44AB, a tax audit is needed for the following,
1. Profession
When it comes to profession, a tax audit is mandatory if the gross receipt in the occupation exceeds Rs. 50 lakhs in a financial year. Below mentioned are the occupations that fall under Rule 6F of the Income Tax Rules, 1962.
- Architect
- Accountant
- Engineer
- Film industry- cameraman, editor, director, actor, music director,
etc.
- Legal professional
- Interior decorator
- Legal professional (lawyer, advocate)
- Technical consultant
- The medical profession (paramedical staff, Doctor, physiotherapist, or nursing)
2. Business
In the case of business, a tax audit is needed if the total sales, turnover, or gross receipts surpluses are over Rs. 1 Crore in the FY. Moreover, if the cash transactions are up to 5% of the net gross payment and receipts. The threshold limit of turnover for a Tax audit is raised to Rs 10 crores. (w.e.f. FY 2020-21)
Income Tax audit report
An individual who performs the income Tax Audit report needs to serve the results through a specified ‘Audit Form’ that is suggested by the Income Tax Department of India. Moreover, Section 44AB defines forms 3CA and 3CB. Along with the two forms the Tax Auditor needs to provide the Form 3CD.
The Tax Audit report has been provided in either of these two forms,
- Form 3CA (company)
A taxpayer who conducts a business or is in a profession and who is already demanded to get his accounts audited under the income tax law. Particulars of Form 3CA
- Form 3CB(firms, individuals)
A taxpayer who is carrying a business but does not requires his accounts to be audited under any law.
- Form 3CD(accounting details/ financial statements)
A detailed statement of particulars is included in Form 3CD. Every detail that is communed to the aspects of the business and transactions are needed to be filled at the required places.
Tax Audit is an important task that is required to be performed by every other individual who falls under Section 44AB of Income Tax Act. When choosing tax audit consulting firms make sure that there is no room for errors. When it comes to tax audit services, we are placed on the list of the best Tax audit accounting firms all over India. Efficient professionals with years of experience are ready to handle the Tax audit tasks for you. For a well-structured Tax Audit report.