Income Tax Audit
There are various kinds of audit being conducted under different laws such as company audit/statutory audit conducted under company law provisions, cost audit, stock audit etc.
Similarly, income tax law also mandates an audit called 'Tax Audit'. As the name itself suggests, tax audit is an examination or review of accounts of any business or profession carried out by taxpayers from an income tax viewpoint. It makes the process of income computation for filing of return of income easier.
Tax audit is conducted to achieve the following objectives:
Ensure proper maintenance and correctness of books of accounts and certification of the same by a tax auditor
Reporting observations/discrepancies noted by tax auditor after a methodical examination of the books of account
To report prescribed information such as tax depreciation, compliance of various provisions of income tax law etc.
All these enable tax authorities in verifying the correctness of income tax returns filed by the taxpayer. Calculation and verification of total income, claim for deductions etc. also becomes easier.
Following categories of taxpayers are required to get tax audit done:
| Category of person | Threshold |
|---|---|
| Carrying on business (not opting for presumptive taxation scheme) | Total sales, turnover or gross receipts exceed Rs 1 crore |
| Carrying on business (opting presumptive taxation scheme under section 44AD) | Declares taxable income below the limits prescribed under the presumptive tax scheme and has income exceeding the basic threshold limit |
| Carrying on profession | Gross receipts exceed Rs 50 lakhs |
| Carrying on the profession eligible for presumptive taxation under Section 44ADA | Claims profits or gains lower than the prescribed limit under presumptive taxation scheme and income exceeds maximum amount not chargeable to tax |
| Carrying on the business and is not eligible to claim presumptive taxation under Section 44AD due to opting for presumptive taxation in one tax year and not opting for presumptive tax for any of the subsequent 5 consecutive years | If income exceeds maximum amount not chargeable to tax in the subsequent 5 consecutive tax years from the tax year where presumptive taxation is not opted for |
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