The tax audit applicability for the current fiscal year (FY 2019-20) has not changed. If the Auditor is not mandated to audit the Taxpayer, he must furnish specific details in Form 3CD. Penalties for not filing the audit or delay in filing it will remain the same as per the existing law.
A tax audit is a systematic examination of a taxpayer’s accounts from an income tax perspective. It helps in the computation of total income and verification of deductions. The main purpose of a tax audit is to produce a report in accordance with the prescribed form requirements. It also helps in establishing the compliance of various income tax laws.
Presumptive taxation is applicable to professionals and businesses with an annual turnover of less than Rs 50 lakh. In the Presumptive Taxation Scheme, net income is calculated on 50% of the gross receipt. Therefore, if the income of the assessee is higher than 50% of the gross receipts, he is required to declare it.
A tax audit can be conducted under two different categories: correspondence audit and office audit. The correspondence audit is the easiest to conduct. The IRS may have some questions about the nature of your business or may want to see proof of commitment. The office audit, on the other hand, is more thorough. It takes about one day and may require more information.
If you are a taxpayer, you should have your books of accounts audited if your annual turnover exceeds Rs 1 crore. In addition to businesses with an annual turnover over Rs 50 lakh, professionals such as engineers, architects, interior decorators, legal experts, doctors, and lawyers should undergo a tax audit.
The purpose of a tax audit is to determine whether the financial information is accurate. The person performing the audit is required to provide a report that details compliance with tax laws. The audit is also a good tool to curb fraudulent practices. A Chartered Accountant can conduct a tax audit if he is a full-time practitioner.
Depending on the type of audit, the taxpayer may be required to file a payment to the IRS. Usually, if a taxpayer agrees with the findings of the audit, the auditor will require them to sign an examination report. However, there are several ways to appeal the findings. If a taxpayer disagrees with the findings of the audit, he can request a meeting with an IRS manager or request mediation. The taxpayer can also file an appeal if the statute of limitations has not expired.