The tax audit in India comes under section 44AB as per the Income Tax Act 1961. In this section, you will find the rules to maintain the books of accounts along with other financial records of the taxpayers. The audit helps to maintain all the required information about income, tax, and tax deductions. It is mandatory to appoint the Tax Auditor in India to undergo the process to find out the accuracy of the information regarding the income tax structure. This practice helps to reduce fraud practice. The auditor will report the audit to the income tax department with an income tax return.
What is the meaning of a tax audit?
Tax audit is a process where books of accounts of any company or organization are examined and assessed by the professionals. Only registered chartered accountant or relevant authorities can be appointed as the Tax Auditor in India to execute the process. This tax audit reviews all the financial flow of the company like income, expenditure, deductions, and taxes of the organization. The income tax filing can be made easy with this taxation purpose. The auditor must report the audit in the prescribed format.
Who has to do the tax audit under section 44AB?
It is mandatory for any person who is earning from any business or profession to maintain the books of accounts in order to ger a tax audit done. A few people are exceptions as they have opted for presumptive taxation under section 44AD, 44ADA, 44AE under the Income Tax Act 1961.
The tax audit is mandatory for the taxpayers who are:
•An individual who is in a profession that has a gross receipt of more than Rs. 50 lakh.
•An individual business with a total turnover of more than Rs. 1 crore in the previous year.
•An individual who “has opted for section 44ADA and 44AD but claims his income lower than the profits that are computed under presumptive taxation and income exceeds the amount that is taxable according to the Income Tax Act”.
•An individual who has opted for section 44AE, 44BB, and 44BBB but the profit computed under the said sections is bigger than the income in the previous year.
Apart from that, anyone who is deriving income under section 44B and 44BBA is not required to do the tax audit.
What is the aim of the tax audit?
There are some major goals for executing tax audits under the Income Tax Act 1961.
•The books of the financial account will be properly maintained by the professional auditor to eliminate any type of fraud activity.
•The auditor will report any sort of discrepancies while proper examination of the books of accounts.
•The auditor will note and report information like tax depreciation, compliance with the provision of income tax law, etc.
•The process of tax computation and the deduction will be ease while auditing.
•The auditor will verify the information on the income tax filing regarding the income, tax, and tax deduction of the taxpayers.