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Income Tax Audit
Ensuring Compliance and Financial Integrity
Income tax Audit
There are many types of audits conducted under various laws.
Similarly, an audit conducted under the Income Tax Act, 1961 is called a ‘Tax Audit’. In the Income Tax Act, 1961, section 44AB mandates provisions for a tax audit, which are explained as follows. In the following circumstance, a tax audit will be mandatory.
Mandatorily subject to tax audit
A taxpayer is required to have a tax audit carried out if the sales, turnover or gross receipts of business exceed Rs 1 crore in the financial year. However, a taxpayer may be required to get their accounts audited in certain other circumstances. We have categorised the various circumstances in the tables mentioned below:
Amendments in the above provision
01
Finance Act 2020
The threshold limit of Rs 1 crore turnover for a tax audit is proposed to be increased to Rs 5 crore with effect from AY 2020-21 (FY 2019-20) if the taxpayer’s cash receipts are limited to 5% of the gross receipts or turnover, and if the taxpayer’s cash payments are limited to 5% of the aggregate payments.
02
Finance Act 2021
With effect from 1st April 2021, the threshold limit of Rs 5 crore is increased to Rs 10 crore in case cash transactions do not exceed 5% of the total transactions.
Why Choose Sandeep Nalla And CO. for Your Income tax Audit Formation
We delve into the essential aspects of income tax audit, its significance in the taxation ecosystem, and the pivotal role it plays in upholding tax compliance and accountability.
About Audit Report
Form 3CA or Form 3CB
Tax auditor furnishes the report in either Form 3CA or Form 3CB. Form 3CA is used when a person is already mandated to get accounts audited under any other law. Form 3CB is used when a person is not required to get accounts audited under any other law.
Form 3CD
Tax auditor must furnish prescribed particulars in Form 3CD, which forms part of the audit report.
Embracing the Income tax Audit
Look ahead to the future of income tax audit and the opportunities for digital transformation, collaboration, and continuous improvement in the audit profession.