ROC Due Date Compliance Calendar for FY 2024-25

Here’s a table summarizing the ROC Due Date Compliance Calendar for FY 2024-25:

FAQs about ROC Compliance

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Tax Audit under Section 44AB of IT Act

Section 44AB of the Income Tax Act of 1961 requires tax audits for certain people and corporations. A tax audit is simply a Chartered Accountant (CA) inspection of a taxpayer’s financial accounts to guarantee correctness and compliance with tax rules.

Tax audits are necessary for the following taxpayer categories:

Businesses

If you own a business with gross turnover of more than Rs. 1 crore, you must have your accounts audited under Section 44AB. If cash transactions are less than 5% then the threshold is 10 crores.

Professionals

Professionals such as engineers, doctors, lawyers, and architects, among others, are subject to tax examination if their gross receipts surpass Rs. 50 lakhs in a financial year.

Presumptive Taxation Scheme

If your business opts for the presumptive taxation system described in Sections 44AD, 44ADA, or 44AE, and the profit declared is less than specified limit, a tax audit becomes mandatory.

Read more on Presumptive taxation.

Procedure for Tax Audit

A tax audit requires numerous processes to ensure a thorough examination of financial information. Here’s a rundown of the procedure:

Appointment of Chartered Accountant (CA)

A qualified CA has to be appointed by the taxpayer to undertake the tax audit.

Documents Submission

All relevant financial papers, including audited balance sheets, profit and loss statements, books of accounts, bank statements, and other appropriate records, are provided to the CA by the taxpayer.

Audit and Verification

The CA evaluates the submitted documentation and validates the financial statements’ accuracy. They verify that accounting standards and tax rules are followed.

Audit Report Preparation

The CA generates an audit report based on the examination using Form 3CA/3CB and Form 3CD, as stipulated by the Income Tax Department.

Filing of Audit Report

The audit report, along with the specified forms, is electronically filed with the Income Tax Department by the due date.

Deadline for Tax Audit

In most cases, the deadline for filing the tax audit report under Section 44AB is the same as the deadline for filing the income tax return. Specific dates, however, may vary depending on the taxpayer’s categorization and other considerations. The following is a simplified table explaining the deadlines:

Penalties for Non-compliance

Noncompliance with tax audit requirements may result in the following fines under the Income Tax Act:

Late Filing Penalty

Failure to file the tax audit report on time may result in a penalty of 0.5% of total turnover or gross receipts, up to Rs. 1,50,000.

Inaccurate Reporting

If the audit report contains incorrect information or errors, a penalty of 150% of the under-reported tax may be imposed.

Non-Maintenance of Books

A penalty of Rs. 25,000 might be imposed if books of accounts are not kept as required by law.

It is crucial to know that the CA’s tax audit report may be investigated by the Income Tax Department. As a result, keeping correct records, adhering to accounting standards, and complying with tax requirements are paramount.

Conclusion

To summarize, understanding Section 44AB of the Income Tax Act is critical for people and businesses to avoid penalties and ensure smooth tax compliance. If you fall into one of the above categories, you should seek the advice of a skilled Chartered Accountant to guide you through the tax audit process and ensure correct financial reporting. Remember that remaining aware and compliant might help you avoid unwanted legal issues and financial damages. 

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What is a Tax Audit?

A tax audit is a systematic examination of financial records and tax-related information of a business or individual to ascertain the accuracy and completeness of their tax returns. It ensures that the taxpayer has maintained proper books of accounts, adhered to applicable tax laws, and correctly calculated their tax liability.

Objectives of Tax Audit

• Promote accuracy and transparency in financial reporting.
• Detect tax evasion and non-compliance.
• Facilitate efficient tax administration.
• Assess the taxpayer’s compliance with tax laws.
• Identify areas of potential tax planning and tax-saving opportunities.

Who is mandatorily subject to Tax Audit?

Applicability of Tax audit under Income tax is dependent upon turnover or business receipts of your business or profession.

For Professionals

If your gross receipts exceed 50 Lacs, you are liable for tax audit.

For Businesses (not opting for Presumptive taxation)

If your Turnover exceeds 10 Crores, you are liable for tax audit. The limit of 10 Cr is applicable if cash transactions are only upto 5% of total receipts and payments. Otherwise the limit is 1 CR. Those opting for and fulfilling the provisions of presumptive taxation schemes are exempt for this tax audit.

For Businesses (opting for presumptive taxation)

Any business which is eligible to adopt presumptive taxation is the one having turnover upto 2 CR, if such business declares the profit below the limit prescribed under presumptive tax , in that case such business must go for tax audit mandatorily.

Changes in Budget 2023 for presumptive tax adopters

The limit of presumptive taxation for businesses (Section 44AD) has been increased to 3 CR from the current limit of 2 CR. This increased limit is applicable from FY 23-24. But this increases limit of 3CR is applicable only if cash transactions are only up to 5% of total receipts and payments.

Similarly for professionals adopting for presumptive taxation scheme under section 44ADA the limit has been increased from current 50 Lacs to 75 Lacs. But this increases limit of 75 Lacs is applicable only if cash transactions are only up to 5% of total receipts and payments.

What constitutes an Audit Report?

An audit report is a formal document prepared by a tax auditor after conducting the tax audit. It includes the following information:

Basis and scope of Tax Audit

• Observations, discrepancies, and exceptions found during the audit.
• Compliance with accounting and tax laws.
• Opinion on the accuracy of financial statements and tax returns.
• Recommendations for rectification of errors, if any.

How and when tax audit reports shall be furnished?

Tax audit reports must be filed electronically using the prescribed forms on or before the due date of filing the tax return. The due date for filing tax audit reports is generally 30th September of the assessment year.

Penalty for non-filing or delay in filing tax audit report

If a taxpayer fails to furnish the tax audit report or files it after the due date, a penalty of 0.5% of the total turnover or gross receipts, subject to a maximum penalty of Rs. 1,50,000, may be levied under Section 271B of the Income Tax Act.

 READ HERE if you want to know more about presumptive taxation scheme.

FAQs

Conclusion

Tax audits play a vital role in promoting transparency, accuracy, and compliance in the Indian tax system. Businesses and professionals should be aware of the applicable thresholds, types of audits, and filing requirements to ensure they meet their obligations. By maintaining proper books of accounts, cooperating with auditors, and filing accurate tax audit reports, taxpayers can navigate the tax audit process smoothly and avoid penalties or legal consequences. Consulting with qualified professionals is highly recommended to ensure adherence to the evolving tax laws and regulations.

Tax Audit Advisory and Filing services can be availed at Tax Vic.

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