Tax Audit

At ETaxwala, we provide professional services for Tax Audits to ensure that your business complies with the legal requirements set forth by the Income Tax Department. A tax audit is an examination of the financial records of a business or individual to verify the accuracy of the income, expenses, and taxes filed. Our expert team helps businesses of all sizes navigate through the complexities of tax audits, ensuring all records are up-to-date, compliant, and transparent.

A Tax Audit is a process through which an auditor examines and verifies the financial statements and records of a taxpayer (whether individual or business). It ensures that the financial statements accurately represent the taxpayer's financial position, and the tax returns filed by the taxpayer comply with the provisions of the Income Tax Act.

Under the Income Tax Act, businesses with a turnover above a specified threshold (currently ₹1 crore for most businesses) are required to get a tax audit done by a qualified Chartered Accountant (CA) every year. This audit ensures that the financial records are in order, tax liabilities are correctly computed, and the business is following the prescribed tax laws.

Benefits of Tax Audit

• Compliance with Tax Laws A tax audit ensures that your business complies with the Income Tax Act and helps you avoid penalties for incorrect filing or misreporting.
• Financial Accuracy It helps in verifying the accuracy of the financial records, ensuring that all income, expenses, and deductions are properly recorded.
• Enhanced Credibility A tax audit enhances the credibility of your business, as it proves that the financial records have been independently verified by an expert.
• Avoidance of Legal Issues With a tax audit, you can avoid legal issues arising from discrepancies or incorrect filings, which could lead to penalties or audits by the tax authorities.
• Tax Planning and Strategy A tax audit provides an opportunity to review the financials and ensure that the business is optimizing its tax liabilities, contributing to effective tax planning.
• Facilitation of Loan Applications When you apply for loans or funding, tax audit reports and financial statements provide lenders with a clear picture of your business’s financial health, improving your chances of approval.

What’s the Process of Tax Audit?

• Step 1: Understanding the Requirement The first step is to determine whether your business is required to undergo a tax audit. Generally, businesses with a turnover of over ₹1 crore (for regular businesses) or ₹50 lakhs (for professionals) are required to undergo an audit.
• Step 2: Appointment of a Chartered Accountant (CA) A qualified Chartered Accountant (CA) is appointed to conduct the tax audit. The CA will be responsible for reviewing your financial records and preparing the audit report.
• Step 3: Gathering the Financial Documents The CA will request various documents such as financial statements, books of accounts, and tax returns. It is important to ensure that these documents are accurate and up-to-date.
• Step 4: Verification of Financial Records The CA verifies the accuracy of income, expenses, assets, liabilities, and other financial transactions. This involves ensuring that all the transactions are correctly recorded and supported by valid documentation.
• Step 5: Preparation of the Audit Report After reviewing the records, the CA prepares the Tax Audit Report (Form 3CA/3CB), which includes the audited financial statements, along with a declaration that the books of accounts have been properly maintained.
• Step 6: Filing the Tax Audit Report The final tax audit report is submitted to the Income Tax Department electronically through the Income Tax Portal. It must be filed on or before the due date (usually September 30th for businesses).

Documents Required For Tax Audit

• PAN Card
• AADHAR Card
• GST Bill
• Light Bill
• Sales Purchase Bill
• Bank Statement

FAQs:

Q. Who is required to conduct a tax audit?


Ans: - Businesses with a turnover of over ₹1 crore or professionals with a gross receipt of over ₹50 lakhs are required to conduct a tax audit.

Q. What happens if I don't get a tax audit done?


Ans: - Failing to conduct a tax audit when required can result in penalties and legal consequences for non-compliance with the Income Tax Act.

Q. Can I hire a non-CA for a tax audit?


Ans: - No, only a qualified Chartered Accountant (CA) can conduct a tax audit and issue the tax audit report.

Q. What is the due date for filing a tax audit report?


Ans: - The due date for filing a tax audit report is typically September 30th of the assessment year.

Q. Can I avoid a tax audit?


Ans: - Tax audits are mandatory for businesses above the specified turnover limit. However, businesses below the threshold are not required to conduct an audit unless instructed by the tax department.

Q. How long does a tax audit take?


Ans: - The duration of a tax audit depends on the complexity of your financial records but generally takes 2 to 4 weeks.

Q. What if discrepancies are found during the tax audit?


Ans: - If discrepancies are found, you must address them by providing clarifications or rectifying the errors in your financial records before filing the tax audit report.