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CA SANDEEP KHANDELWAL
Tax collection is significant for the economic development of a country. The government needs revenue to fund public services like healthcare, education, infrastructure, and social welfare schemes. Income tax is one of the key sources of revenue for the government. The revenue generated from taxes is used to fund various development projects and provide essential public services like healthcare, education, infrastructure, and social welfare schemes.
Tax authorities plays a vital role in encouraging the abidance to tax laws and regulations. The Government has inserted section 44AB in the Income Tax Act, 1961 mandating Tax Audit of the Accounts of a certain category of persons carrying on a business or engaged in a profession.
Tax audit is an independent and systematic review of the financial records and tax liability of a business by a qualified Chartered Accountant (CA). It is conducted to ensure compliance with the provisions of the Income Tax Act, 1961, and discharge of tax liability correctly. The requirements of the provisions place a tremendous responsibility on the tax auditor in carrying out the audit and in furnishing the audit report setting forth the prescribed particulars.
Here are some key points to know about tax audit:
Applicability: Tax audit is mandatory for certain taxpayers (businesses and professionals), as specified under Section 44AB of the Income Tax Act, 1961, whose annual turnover or gross receipts for the financial year (called previous year under Income Tax Act, 1961) exceeds the limits prescribed by the Finance Bills from time to time. It is also mandated for businesses who have opted presumptive taxation regime as specified under the Income Tax Act, 1961 but not declaring profits over and above the specified presumptive income threshold. INR 1 crore for the financial year.
Objectives: The primary objective of tax audit is to verify the correctness and completeness of the financial records and tax returns of the taxpayer. It ensures that the taxpayer has correctly computed and paid the taxes due as per the Income Tax Act.
Scope: The scope of tax audit includes examining the books of accounts, verifying compliance with tax laws, and reporting on any discrepancies or errors found during the audit.
Reporting: The CA conducting the tax audit is required to submit a tax audit report in the prescribed format to the Income Tax Department. The report contains details of the audit findings, observations, and other relevant information.
Benefits: Tax audit provides several benefits, including ensuring compliance with tax laws, identifying errors and discrepancies in the financial records, and provide an opportunity to rectify any mistakes before the tax authorities initiate an inquiry.
How Can MNRS Help?
Tax audit by MNRS helps to ensure that the financial statements of the taxpayer are accurate and complete. We verify that the financial statements reflect the true and fair view of the taxpayer’s financial position, and that the taxpayer has correctly computed and paid the taxes due as per the Income Tax Act. Our Tax Audit function ensures in strict compliance with law and helps an organization in several ways including: –
- Tax compliance review prior to commencement of Tax Audit before closure of financial year, prevents errors in the financial records and results in avoidance of consequent penal action from tax authorities at later stage.
- During the course of Tax Audit our audit team verifies that the taxpayer has correctly reported all taxable income, claimed only legitimate deductions and exemptions, and complied with the tax laws. This mitigates the burden of tax penalties on one hand due to wrong claims and results in savings on other hand by claiming legitimate deduction or exemption which are available under the various provisions of Income Tax Act, 1961, which otherwise would have escaped.
- During Tax Audit assignment, we also review business’s internal controls and processes to identify areas for improvement. By strengthening internal controls, businesses can reduce the risk of errors, fraud and non-compliance.
- Verification of taxpayer’s financial records helps in identifying any issues with tax compliance. Based on our audit we can provide recommendations on how to address these issues and avoid penalties and fines.
- Our Tax Audit Report provides stakeholders with confidence that the financial statements are reliable and comply with the relevant laws and regulations.
- Our review of financial records and transactions of the entity enables us to identify opportunities for tax savings. By taking advantage of these opportunities, businesses can reduce their tax liabilities and improve their bottom line.
- If a taxpayer is facing a tax dispute with the tax authorities, we can provide support by reviewing the taxpayer’s financial records and transactions and providing expert opinions on tax matters. This can help resolve the dispute in a timely and efficient manner.
- Highly skilled professionals deployed by us in our Tax and Regulatory Division are responsible for undertaking Tax Audit assignments and are committed to maintain high degree of integrity and confidentiality of client’s affairs.