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Tax Audit

Under the Income Tax Act of 1961, a tax audit is a cross-examination of the taxpayer’s books of accounts by a chartered accountant who holds a full-time Certificate of Practice.

The circumstances under which a tax audit becomes required for some taxpayers are covered by Section 44AB. A tax audit’s primary goal is to ensure that the financial records are accurate and to prevent fraud and tax evasion.

Numerous audits are performed under various regulations, such as the statutory audit required by company law and the audits of costs and inventory. A similar audit, known as “Tax Audit,” is mandated under income tax law as well.

Tax audits come in a wide variety of forms, but they always revolve around an income tax perspective, and this is what the name implies. It simplifies the process of calculating income for the purpose of submitting a tax return. If a company’s sales, turnover, or gross receipts surpass Rs 1 crore in the financial year, a tax audit must be conducted. However, in some cases, a taxpayer may be forced to undergo an audit of their financial records.

Independent auditors, usually chartered accountants, are employed for the purpose of undertaking tax audits. As part of the corporate planning process, every company must undergo a tax audit. Organizations and businesses can reduce business risks and liabilities by conducting a tax audit. A tax audit might be beneficial to the individual taxpayer as well. Individuals who are audited by the IRS may find it difficult to maintain track of their tax payments. Thus, tax audit services are needed to ensure that all tax-related concerns are handled properly. Tax auditors can also work with tax authorities to help businesses and individuals get tax relief. This is a regular practice where businesses and individuals can truly benefit from a thorough tax audit. Lex N Tax Associates is known for the Best Tax Audit Services in Delhi.
Tax Audit Report

Using particular “Audit Forms” that have been prescribed by the income tax department, the individual performing the audit must record their findings in a report.

Forms 3CA and 3CB are mandated by Section 44AB. The auditor must also provide a form 3CD in addition to these two forms. Let’s go over these forms in greater depth.

Form 3CA or Form 3CB may be used by a tax auditor to submit his or her report where:

    • A person conducting business or practicing a profession is required to submit Form No. 3CA if an audit of their accounts is required by another law.
    • Form No. 3CB is used when a business or profession is not required to be audited by any other law.
    Tax Audit Limit

    Section 44B of the Income Tax Act requires the submission of accounts for a tax audit in some particular circumstances. In the case of business, if the total sales, turnover or receipts for the previous year is more than INR 1 Crore then there is a requirement to submit the account for a tax audit. Moreover, in the case of presumptive taxation, which is covered by Sections 44AD, 44E, 44AF, 44BB OR 44BBB; the requirement to submit the accounts for a tax audit arises if it is claimed that the profits and gains from the business are lesser as compared to the same calculated under the relevant sections.

    In the audit report, there is Form No. 3CD, must be filled out by the tax auditor in the case of either of the audit reports.

    In order to submit a tax audit report online, the tax auditor must log in as a Chartered Accountant using his credentials. CA data should be added to the login portal for taxpayers.

    The taxpayer should be able to accept or reject the audit report when it has been uploaded by the tax auditor via their login site. If the audit report is denied for any reason, all the steps must be repeated until the taxpayer accepts it.

    To avoid penalties, you must submit your tax audit report by the deadline for completing your income tax return. 30 September (extended to 15 February) for other taxpayers, and 30 November (extended to 28 February 2022) for those who have engaged in an international transaction, respectively, are the deadlines. Tax audit services limit for ay 2022-23.

    Tax Audit Applicability

    The following people, with the assistance of a chartered accountant, must perform a tax audit:

    • Whoever makes more than Rs. 2 crore in annual gross revenue or total turnover in a business.
    • any person who is actively seeking employment and whose annual gross income exceeded fifty lakh rupees (For those who use the presumptive taxation system, however, this clause does not apply).
    • Someone qualified for the presumptive taxation system who claims that the earnings and gains of a certain firm are lower than what is computed in accordance with the presumptive taxation system and that their income is more than the amount that is taxable. Taxpayers with sales or turnover under Rs 2 crores who employ a presumptive taxation scheme other than the one stated in Section 44AD are covered by this provision.

    Companies and cooperative societies are required by law to have their books audited by an independent auditor. Further tax audits of such organizations are prohibited by Section 44AB of the Code. Taxpayers in this position should just request and present the relevant audit report, along with a chartered accountant’s report on Form 3CA or 3CB only. It is necessary to complete Form 3CD with the necessary details, Best Tax Audit Services in Delhi.

    Last Date for Tax Audit

    The submission of reports and the auditing of the accounts must be finished by September 30th of the specific financial year. The deadline for submitting the report relies on the deadline for submitting the income tax return, which is March 15. Due date of income tax return must be met in order to file report. Taxpayers who conduct an international transaction during the fiscal year must file an ITR by the 30th of November of the following assessment year. For other taxpayers, the filing deadline is 30 September of the next assessment year, Lex N Tax Associates file your tax audit before due date of tax audit  Services for ay 2022-23.

    What is 3CA, 3CB and 3CD?

    The forms 3CA, 3CB, and 3CD are related to tax audit reporting in India under the Income Tax Act.

    1. Form 3CA: This form is a report that needs to be submitted by a chartered accountant (CA) after conducting an audit of the accounts of a taxpayer who is required to get their accounts audited under the Income Tax Act. It is applicable when the taxpayer's turnover exceeds a specified limit, as per the provisions of the Income Tax Act.

    2. Form 3CB: This form is also a report submitted by a chartered accountant after auditing the accounts of a taxpayer who is required to get their accounts audited under the Income Tax Act. It's similar to Form 3CA but is applicable in cases where the taxpayer is not required by law to submit a report from an accountant in Form 3CA. Typically, this applies to cases where the taxpayer's turnover does not exceed the specified limit under the Income Tax Act.

    3. Form 3CD: This form is a statement of particulars required to be furnished along with the audit report under sections 44AB and 44AD of the Income Tax Act. It includes details such as information about the taxpayer, accounting policies followed, details of fixed assets, loans, advances, provisions, and other financial information relevant for tax purposes. Form 3CD provides additional details and disclosures beyond what is covered in Forms 3CA and 3CB.

    Forms 3CA and 3CB are audit reports submitted by chartered accountants, while Form 3CD is a statement of particulars that accompanies these reports, providing additional details relevant for tax purposes. These forms are important for ensuring compliance with tax laws and regulations in India.