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Tax Audit under the Income Tax Act

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In case the turnover of the taxpayer (irrespective of its category) is equal to or more than Rs. 1 Crore from the business or Rs. 50 Lac from the income from profession then as per The Income Tax Act, 1961 an audit known as Tax Audit by a practicing chartered accountant (CA) is required to be done under section 44AB. The tax audit report must be filed online at the income tax portal before 30th September of the assessment year.

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Tax Audit under section 44AB of the Income Tax Act, 1961

Tax Audit is an independent audit by a chartered accountant in full-time practice concerning the matters related to Taxation only and a report confirming that there is no concealment of income by the taxpayer and that there is no non-payment of tax liability and the same has been paid on due dates. The tax audit is a statutory obligation on the part of the taxpayer and is applicable on all cases where the turnover or the gross receipts during the previous year is more than the limit prescribed under section 44AB for the respective assessment year. The due date for filing the tax audit report is 30th September of the assessment year. In case the audit report is not submitted within its due date then the taxpayer is required to pay a penalty of an amount equal to 1.5% of the gross receipts/turnover, however, subject to a maximum fine of Rs. 1.5 lac.

Tax Audit

Turnover or Gross Reciept Limit For Tax Audit For Assessement Year 2019-20

SL. NO. TYPE OF TAXPAYER (ASSESSEE) TURNOVER FORMS APPLICABLE
1. Company 1 Crore 3CA and 3CD
2. LLP - Business Income 1 Crore 3CA and 3CD
3. LLP - Income From Profession 50 Lac 3CA and 3CD
4. Partnership - Business Income 1 Crore 3CA and 3CD
5. Partnership - Income From Profession 50 Lac 3CA and 3CD
6. Individual -Business Income 1 Crore 3CB and 3CD
7. Individual - Income From Profession 50 Lac 3CB and 3CD
8. Presumptive Business Income u/s 44AD 2 Crore 3CA and 3CD
9. Presumptive Profession Income u/s 44AD 50 Lac 3CA and 3CD

Tax Audit Report Forms

The tax auditor may be the same person who is the statutory audit of the company or he can be any other independent practicing CA. The members of the company in the annual general meeting can appoint him or the board of directors or the managing director if authorized by the board can appoint a tax auditor. In case of LLP and partnership firms, any partner of the firm can nominate a tax auditor. If the taxpayer is an individual assessee, then he alone has to appoint a tax auditor. The tax auditor has to conduct and file the tax audit report directly on the portal of the income tax department, which, however, require the approval of the taxpayer. The tax audit report is prepared in following three forms based on the type of the tax audit undertaken.

FORM NO. 3CA

FORM NO. 3CA

The tax audit report needs to be prepared as per prescribed form 3CA in case the assessee is also required to get its books of accounts audited under any other law. For instance in cases of the company, every company is required to get the books audited under the companies act, 2013.

FORM NO. 3CB

FORM NO. 3CB

In case the assessee /taxpayer is not required to get its books of account audited under any law then the tax audit report need to be prepared as per prescribed form 3CB. For instance, in case of a salaried individual or firms, if their income is more than Rs. 1 crore.

FORM NO. 3CD

FORM NO. 3CD

Form 3CD is an annexure to form 3CA or 3CB as the case may be. The tax auditor is required to fill particulars of the taxpayer for which tax audit was conducted. The form 3CD is in the form of an information memorandum and forms part of the audit report u/s. 44AB.

Difference Between Tax Audit & Other Forms of Audit

There is various kind of audits prescribed in India under different legislation, The audit required under the income tax act is specific to the compliance of the provisions of the income tax act. Interestingly all the audits which we are discussing here are to be done by a practicing chartered accountant. A taxpayer can get all its certifications done by one CA, or several auditor or firms of auditors can be engaged to do the audit. below is the three other types of the audit, and a careful understanding of the same is essential to appreciate the difference between the tax audit and statutory audit.

Meaning of Advance Tax

Audit Under Company Act

Every company registered in India under the companies act,2013 is required to get its books of account audited irrespective of its turnover. This kind of audit is a thorough checking of the books of account, the vouchers and supporting documents so that the auditor can express their opinion as required under the law.

Who is Exempt From Advance Tax

Audit Under LLP Act

Under LLP act, 2008 only those LLP is required to get their books audited where the contribution/capital of the LLP is equal to or more than 25 lac or where the turnover of the LLP has reached or crossed Rs. 40 lac. The scope of the audit is similar to company audit, and it also is known as the statutory audit for LLP.

Interest on Late Payment

Audit Under GST

The new law of The goods and services tax act imposes a universal audit on all persons registered under GST act in case the turnover of the taxpayer is equal to or more than one crores. This audit is a detailed reconciliation report prepared and certified by a practicing chartered accountant concerning the GST Act.

How Audit Under Income Tax Act is Different from Statutory Audit

While the Stautory audit as required under the companies act 2013 or the Limited Liability Partnership Act, 2008, is general in nature and comprehensive. The scope of work under the statutory audit involves detailed checking of books of account maintained by the company or LLP. The statutory auditor is required under law to express a written opinion whether the books of account and records kept by the company or LLP gives a true or fair view of the affairs of the business or not. Whereas the tax audit as required under the Income tax act has an entirely different objective, wherein the tax auditor is required to prepare a detailed report in a specified format, ie. 3CA/ 3CB and 3CD giving details of the compliance with various provisions of the income tax act. In other words, the tax audit is narrow in its scope in comparison with the statutory audit.

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