The income tax department on October 26 once again extended the due date for filing income tax return, where audit reports are required for fiscal 2021-22 by seven days from October 30 to November 7, 2022. This is the third extension granted for filing of tax returns where an audit is required. The original date was September 30, 2022, which was extended to October 7. Later on, it was extended till October 31 and is now again extended to November 7, 2022.
While extending the deadline for the first time from September 30 to October 7, in an official statement Central Board of Direct Taxes (CBDT) stated, "On consideration of difficulties faced by the taxpayers and other stakeholders in the filing of various reports of audit for the Assessment Year 2022-23, CBDT has decided to extend the due date for filing of various reports of audit for the Assessment Year 2022-23, which was 30th September 2022 to 07th October 2022.” This time around, the CBDT did not elaborate on any reason behind its decision to push back the deadline.
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Let’s read more about who needs to get their accounts audited before filing income tax returns.
What is an income tax audit?
As the name suggests, a tax audit is a process of checking, reviewing and inspecting the books of accounts, receipts, invoices and so on of a business or profession by a chartered accountant. “The taxpayers who are subject to Income tax audit are required to get their accounts i.e. balance sheet and profit and loss account audited by a practising chartered accountant,” said Sandeep Sehgal, Partner-Tax, AKM Global, a tax and consulting firm.
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A chartered accountant is supposed to check whether books of accounts have been maintained and income-tax rules are followed properly or not by the taxpayer.
“The auditor is required to furnish an audit report in Form 3CB along with Form 3CD. Form 3CD is a questionnaire, wherein the auditor needs to answer several questions regarding the accounts of the taxpayer like the method of accounting, type of accounts maintained, status of TDS compliances, types of expenses which should not be allowed as an expense, etc. The auditor needs to file this report online which the taxpayer will need to accept before filing his/her tax return,” explained Sehgal.
Who needs to get their accounts audited?
As per section 44AB, in the case of a specific business, or if the income or turnover of a taxpayer exceeds stipulated limits, a tax audit is required.
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“Every person carrying on business WHERE the total sales exceed Rs 1 crore is required to carry out an audit. However, if the total of such sales received or payment made (as the case may be), in cash, does not exceed 5 percent of the total amount, then the threshold required for an audit goes up to Rs 10 crore,” said Sehgal. Also, every person carrying on a profession, if the gross receipts from such a profession exceed Rs 50 lakh, a tax audit is required.
Keeping in view the hardship and expenses that a small and marginal business person or professional has to bear in order to maintain books of accounts and get them audited, there is the Presumptive Taxation Scheme. The scheme is defined under three sections—44AD, 44ADA and 44AE—of the Income-Tax Act, 1961, depending on the type of business and profession. A person adopting this scheme while filing returns can declare income at a fixed prescribed rate. Those who opt for this scheme to file their income tax returns are not required to maintain books of accounts or get them audited.
However, an “audit is mandated for individual taxpayers carrying on business and opting for presumptive taxation in certain situations like if their gains are lower than the prescribed limit or in case of losses where the turnover exceeds Rs 1 crore etc. The tax audit is required to be conducted by a chartered accountant,” said Aarti Raote, partner, Deloitte India.
Besides business and profession, even if you are a salaried individual you may need to go for an audit of accounts if you do intra-day trading in the stock exchange. This is because intraday trading in stocks is usually considered as business activity and if turnover exceeds the stipulated limit, an income tax audit u/s 44AB needs to be carried out.
Cost of getting books of account audited?
If you are liable for a tax audit, you need to maintain books of accounts. You may take the help of a chartered accountant to guide you about the maintenance of books of accounts. “A chartered accountant in practice is eligible to sign the audit report. Audit costs depend on the complexity and volume of transactions and may start anywhere from Rs 10,000,” said Sehgal.
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