Tax Audit | Commerce & Accountancy Optional Notes for UPSC PDF Download

Introduction

• The primary objective of the tax audit is to calculate the taxable income in accordance with the law and to ensure transparency in the financial statements submitted by taxpayers to the Income-tax department.
• The tax audit under section 44AB of the Income-tax Act 1961 is an important area of practice for Chartered Accountants. Since the inception of the tax audit, we have been entrusted with the responsibility to fulfill the duties as tax auditors to ensure proper compliance with tax laws by taxpayers.

The Institute of Chartered Accountants of India has defined auditing as follows:

• "A systematic and independent examination of data, statements, records, operations, and performances (financial or otherwise) of an enterprise for a stated purpose. In any auditing situation, the auditor perceives and recognizes the propositions before him for examination, collects evidence, evaluates the same, and on this basis formulates his judgment which is communicated through his audit report."
• Under the current provisions of section 44AB, every person engaged in business is required to have their accounts audited if the total sales, turnover, or gross receipts in the previous year exceed sixty lakh rupees. Similarly, a person engaged in a profession is required to have their accounts audited if the total sales, turnover, or gross receipts in the previous year exceed fifteen lakh rupees.

In order to reduce the compliance burden on small businesses and professionals, it is proposed to increase the threshold limit for:

• Total sales, turnover, or gross receipts specified under section 44AB for getting accounts audited, from sixty lakh rupees to one crore rupees for persons engaged in business, and
• from fifteen lakh rupees to twenty-five lakh rupees for persons engaged in a profession.
• It is also proposed that for the purposes of presumptive taxation under section 44AD, the threshold limit of total turnover or gross receipts would be increased from sixty lakh rupees to one crore rupees.
• The year-wise limit for section 44AB tax audit from the financial year 2009-10 onwards is provided below. Two years ago, the limit was extended by 50%.

These amendments will take effect from 1st April, 2013 and will, accordingly, apply to the assessment year 2013-14 and subsequent assessment years.