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Tax Audit

Tax Audit

Income tax law mandates an audit called ‘Tax Audit’. As the name itself suggests, a 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.

Objectives of tax audit

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 for best tax Auditing Service firms in India.
  • 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

Who is mandatorily required for Tax Audit?

Following categories of taxpayers are required to be eligible for tax audit done:

Category of person Threshold
Person carrying Business
Carrying on business (not opting for presumptive taxation scheme*) Total sales, turnover or gross receipts exceed Rs 1 crore in the FY
Carrying on business eligible for presumptive taxation under Section 44AE, 44BB or 44BBB Claims profits or gains lower than the prescribed limit under presumptive taxation scheme
Carrying on business eligible for presumptive taxation 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 the business and is not eligible to claim presumptive taxation under Section 44AD due to opting out for presumptive taxation in any one financial year of the lock-in period i.e. 5 consecutive years from when the presumptive tax scheme was opted If income exceeds the maximum amount not chargeable to tax in the subsequent 5 consecutive tax years from the financial year when the presumptive taxation was not opted for
Carrying on business which is declaring profits as per presumptive taxation scheme under Section 44AD If the total sales, turnover or gross receipts does not exceed Rs 2 crore in the financial year, then tax audit will not apply to such businesses.
Carrying on profession  Total gross receipts exceed Rs 50 lakh in the FY
Carrying on the profession eligible for presumptive taxation under Section 44ADA

1. Claims profits or gains lower than the prescribed limit under the presumptive taxation scheme

2. Income exceeds the maximum amount not chargeable to income tax

How ASC Helps

  • Assurance that taxation rules have been fully complied.
  • Making changes/rectifying changes which is required.
  • Guidance of changes in I.T Law.

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