Tax Audit & its Applicability for the financial year 2020-21.
Tax audit means, auditing of your books of accounts from full time practicing Chartered accountant (Reference to section 44AB of income-tax Act)
The main purpose of this tax-audit is, to verify in detail and report the accurate financial information to Government / tax department.
Threshold limit to make Tax Audit compulsory for the financial year 2020-21
The turnover threshold limit for tax audit is Rs.10 Crore where the business is carrying is receipts and payments are more than 95% in digital mode.
The business transaction in cash mode is more than 5%, than the threshold limit for Tax audit is 1 Cr.
How to calculate this 5% Cash limit?
The below transactions are considered as Cash transactions:
- Cash Receipt from Customers
- Cash Loan
- Advance received (from customers) in cash
- Cash investment by directors/ partners
- Cash sale of fixed assets
- Cash payment to suppliers, vendors
- Repayment of loan by cash
- Cash advance to suppliers
- Cash settlement to directors/ partners
- Cash payment for purchase of capital goods.
Below are NOT considered as Cash transactions.
- Cash withdrawal from Bank
- Cash deposit into Bank
So, all the above cases, if the Cash limit is within the 5% limit, then no tax audit attracts for the business turnover up-to 10 Crore, else tax audit attracts.
Types of Tax Audit Report
Applicability of 3CA, for business who are required to conduct Audit under Companies Act, statutory Audit, (except Income-tax Act)
Applicability of 3CB, is for Income-tax Audit, where business turnover carrying in cash for more then 5%, as per IT provisions.
It’s a statement of details provided in the format of 3CD, where tax audit report applies and this need to be certified from Practicing CA.
It’s a applicable to non-residents and Foreign companies, where they receive for royalty, technical fee, professional fee etc.,
Due date of filing Tax audit FY 2020-21
Tax audit cases due date: 30/Nov/2021
Belated revised return can be filed upto: 31/Jan/2022
Compulsory maintenance of books for tax audit
- Cash book, Bank records
- Journal as per books of accounts in systematically
- Ledgers – Sales, purchase, stock etc
- Bills, receipts
Penalty for Non filing tax audit report
Where, the tax audit filing is mandatory cases; but fails to file, then the penalty attracts at 0.5% of the total turnover or Rs.1,50,000 whichever is minimum.
Head of income
New Taxation u/s 115BAC
Rs.2,50,000 to Rs.5,00,000 –5%
Rs.5,00,001 to Rs.7,50,000 – 10%
Employer contribution to NPS, PF & Superannuation Fund – if aggregate contribution is exceeding Rs. 7.5 lakh, it is taxable as Perquisite u/s 17(2).
Other Source income
– Dividend received on or after 01-Apr-20 is taxable at normal rates.
Late Fee u/s 234F
From AY 2021-22, if
Total income is:
For more about Tax audit filing and support, please reach our Team IN filing office.