As the name suggests income tax audit is the process of evaluating whether the company or an individual is accurate in paying taxes as per their gross income in a financial year. According to the law in India, an external agency is required to examine the return files from deductions, income, and expenditures. The process of income tax audit is to simplify the computation of tax returns.
The primary function of the tax audit is to evaluate the taxable income according to the law and maintaining clarity in the financial statements of the company or an individual. It is essential for all taxpayers to remember file the tax audit report before due date and it is vary on the basis of taxpayer’s category. One Click Business Solutions is one the best tax audit accounting firm, you can find easy online process of income tax audit by highly experienced CA consultant for your business or individual.
A taxpayer needs to get through an income tax audit if an individual crosses an annual income of Rs 1 crore. However, there are other circumstances too, when there is a need to conduct an income tax audit. Being a professional, receipt over 50 lakhs makes you eligible for a tax audit.
● One of the main purposes of an Income Tax audit is to check the accuracy of individuals and companies and also their records. The entire procedure is conducted under the supervision of a chartered accountant.
● The findings are needed to be reported by the tax auditor after conducting the analysis of the precision and the imprecision in filling the Income Tax Returns.
● Tax audit inspects the malpractices in filing income tax returns.
● To report details of tax depreciation, compliances, etc. It acts as a method of calculating and assessing the accuracy of ITR that is filed by an individual or a company.
● The chartered accountant (CA) is assigned to conduct a tax audit of a company or an individual who has to produce the tax audit online through their registered login credentials.
● Relevant information about the chartered accountant is needed to be mentioned by the taxpayer in their login platform.
● Once the auditor uploads the income tax audit report, the taxpayer has to accept or reject it on their login platform. The process needs to be continued until the taxpayer accepts the income tax audit report.
Once approval of name is completed, one requires to draft Articles of Association and Memorandum of association. Both AOA and MOA are to be filed with the Ministry of Corporate Affairs with the subscription statement.
● The tax audit report needs to be submitted on or before the determined date of filing income tax returns.
As per the income tax act, section 44AB is applicable to certain organization who meet specific requirements and are in need of getting their accounts audited by a chartered accountant. This section deals with organizations that meet the requirement of getting their accounts audited by an authorized chartered accountant. The assessing officer takes charge of calculating and computing the total taxable income of the company
Section 44AB is applicable in situations like,
There are circumstances where an individual's total income or the turnover of a financial year surpasses the taxable limit that is permitted by the law, regardless of their turnover in prior years.
Few more ROC (Registrar of Companies) compliance is needed by Pvt Ltd Company during every financial period.
Situations where an individual has a lower income than that of the taxable limit, but their revenue from the business is more than that of the taxable limit permitted.
In some specific cases, individuals do not cross the maximum taxable limit, but the official needs the accounts of the personnel to be audited.
Section 44AD provides tax relaxation to certain individuals, to cut off the process of audit. Although individuals who fall under section 44AB are excluded from the list. This section is a presumptive taxation scheme that was introduced by the income tax law, to cut off the burden on the small taxpayer. People who fall under this section need not show their accounts or do they require an audit of their financial accounts. The income tax law 2020 has extended the relaxation by including professionals who earn less than 50lakhs in a financial year
This section covers every type of business, apart from the ones that involve plying, leasing, and renting goods. As these particular businesses fall under Section 44AE, therefore deductions under section 44AD can be claimed.
HUFs (Hindu undivided families) and partnerships are eligible to claim the deductions under section 44AD as long they are residents of India. However limited liability partnerships do not fall under this section.
Any individual who desires to file his income tax return under section 44AD can opt to return at 8% or above.
If a profession falls under Section 44AA, is not applicable in section 44AD. individuals who conduct agency-type work or the source of income is commission-based are ineligible to claim deductions within this section.
d. Interior decorators
e. Chartered accountants
g. Technical consultant
Section 44ADA provides an easy method of taxation for calculating the profits and gains of small scales businesses under specific circumstances. This action was introduced to enlarge the scheme of easy taxation for some specific professionals. Previously the presumptive scheme was only applicable to small businesses. Section 44 ADA reduces the compliance stress on small-scale businesses. Under this scheme of taxation, the profit is presumed at 50% of the gross receipts.
Section 44ADA is applicable for Hindu undivided families(HUFs) and partnership firms
Individuals whose gross receipts are below Rs 50 lakhs in a financial year are eligible for the beneficiaries.
Professions that are eligible for Section 44ADA are as follows,
a. Technical consulting
b. Interior decoration
g. Professionals involved in the entertainment field like movie artists, producers, editors, music directors, dancers, etc
h. Accountants, etc.
Even though an income tax audit may seem to be a simple procedure to the above-mentioned information but things are not so easy. To conduct a successful income tax audit process and cut off the chances of adverse situations, availing of expert services is always a must. Therefore, while you hire One Click Business solutions Pvt.Ltd for the task, you are in safe hands. Chartered accountants we assign to conduct the income tax audit of your organization or your account are efficient in this field. Not only do we include efficiency in our services, but we also make sure that the professionals who work for us are capable of serving realistic solutions to the issues. Therefore every penny you spend on hiring our chartered accountants will turn out to be beneficial for you and your organization.
● There are cases where an individual owns a business as well as a profession, the tax audit is not subjected to a total of both
● There is a need to get the account books audited when the gross receipts of all the professions collectively cross 50lakhs if the individual is a part of more than one profession
● In the case where the business turnover is Rs 90 lakhs and professional receipts are 40lakhs, there is no requirement for an audit in either of the accounts.
The term audit means official inspection. Therefore income tax audit falls under the Income Tax Act 1961, under section 44AB, individuals and businesses must get their book of income audited. It is mandatory for people and businesses, once their transactions are over and above a specific amount.
The main motive for conducting a tax audit is to confirm that an individual or a business is according to the tax law that is generated by the Income Tax Act of India. Moreover, it also provides reliability to financial statements and also provides the shareholder's belief that the accounts are fair.
It is essential for a taxpayer to have a tax audit done if the sales or gross receipts of their business are more than Rs 1Cr in a financial year. In the finance Act 2021, the threshold limit was increased from Rs 5 Cr to Rs 10Cr given the cash transaction of the business does not exceed 5% of the entire transactions.
The online process of tax audit is as follows, Income Tax portal