There are various types of audits carried out under various regulations, such as company audits/statutory audits carried out under company law provisions, expense audits, stock audits, and so on. Similarly, income tax law requires an investigation such as a ‘Tax Audit.’ Tax audit, as the term implies, is an inspection or analysis of the finances of any company or occupation carried out by taxpayers from an income tax standpoint. It simplifies the method of calculating taxes to file income tax returns.
The primary goal of an income tax audit is to ensure that the taxpayer follows the income tax laws and regulations throughout the fiscal year. The taxpayer’s purchases to Receipts, expenses, loans, exemptions, and so forth are all following the provisions. Other goals include the following:
If a taxpayer fails to comply with tax audit requirements, he or she must pay the required penalty. According to Section 271B of the Income Tax Act, the liability would be the least of the following:
The income tax agency, on the other hand, waives the liability if the taxpayer demonstrates a legitimate excuse for noncompliance. The below are some of the legitimate grounds for which a penalty waiver can be granted:
If a taxpayer’s revenue, turnover, or gross receipts surpass Rs 1 crore in a fiscal year, he or she shall undergo a tax audit of his or her books of accounts.
The Rs 1 crore threshold cap is proposed to be raised to Rs 5 crore with effect from AY 2020-21 (FY 2019-20). The taxpayer’s cash receipts and payments are subject to the following condition:
In such cases, a taxpayer can be required to comply with tax audit requirements.
The report’s due date is determined by the due date of the income tax return. The declaration must be filed on or before the due date of the taxpayer’s income tax return. For taxpayers who partake in an overseas trade within the fiscal year, the ITR filing deadline is November 30th of the next appraisal year. For all taxpayers, the filing deadline is September 30th of the following appraisal year.
Q1. What is the Income Tax Audit limit?
Section 44AB of the Income Tax Act of 1961 requires any person carrying on business to have his books of accounts audited if his gross receipts/turnover exceeds 1 crore during the year (the threshold limit is 2 crore in the case of presumptive taxation u/s 44AD).
Q2. When is the tax audit date?
Section 44AB Income Tax Audit – Criteria, Audit Report, Penalty Individual taxpayers have until December 31, 2020, to file their income tax returns (ITRs) for the fiscal year 2020-21. The deadline for audits, transfer pricing proceedings, and other taxpayers have been extended to January 31, 2021.
Q3. What does tax audit mean?
A tax audit is an IRS review of your tax return to ensure that your income and deductions are right. A tax audit occurs anytime the IRS wishes to review your tax return more carefully to ensure that your taxes and deductions are right.
Q4. Under Section 44AB, who is subject to a tax audit?
According to Section 44AB, the following individuals are expected to have their accounts audited: If a person’s net revenue, turnover, or gross receipts (as the case may be) in the company for the year meet or exceed Rs. 1 crore, he is considered to be in business.
Q5. What constitutes an audit report?
Form No. 3CA is furnished when a person carrying on business or career is already required to have his accounts audited under some other law, when a person carrying on business or profession is already mandated to have his accounts audited under some other legislation, and where a person carrying on a company or occupation is not allowed by statute to have his accounts audited.