Mandatory Audit
All the major audits are discussed below in this article. It will be helpful to the readers to establish which all type of audit is mandatorily applicable to him. I have tried to make this article very easy to understand.
Sec 44AD: Small businesses can now avail presumptive taxation if their turnover is up to Rs. 3 crore (previously Rs. 2 crore).
Sec 44ADA: Professionals like doctors, lawyers, engineers, etc., can now avail presumptive taxation if their gross receipts are up to Rs. 75 lakh (previously Rs. 50 lakh).
These changes are applicable for the financial year 2023-24 and assessment year 2024-25.
1. Tax Audit
Tax Audit is mandatory under Income Tax Act, 1961 to following “Person”
Person Carrying Business: Total Sales, Turnover or Gross Receipt exceeds Rs. 1 Crores (*However from FY 2016-17 person can opt for presumptive income of 8% or Higher percentage if his total sales or turnover is not more than Rs. 2 Crores, in that case Tax Audit will not be applicable. Further if person conducting business, receives payment digitally then for such transactions, profit can be presumed as 6%. Applicable from FY 2016-17 onwards)
Person Carrying Profession: Gross Receipts Exceed Rs. 25 Lakhs. (*However from FY 2016-17 person can opt for presumptive income of 50% of higher if his gross receipts is not more than 50 Lakhs. If any person opts for Presumptive Income then he is not liable for tax audit)
If a person carrying Business and profession shows profit less than the rate of presumptive percentage then too he is liable to get his books audited.
*Please note: Presumptive Income under Section 44AD and Section 44ADA is applicable only to Resident individual, HUF and Partnership firm (Excluding LLP).
Due Date of Filing Tax Audit Report is 30th September Every year.
2. Statutory Audit
Individual/HUF/Partnership Firm: No Statutory Audit Applicable.
LLP: Statutory Audit is Applicable only if turnover in any financial year exceeds Rs. 40 Lakhs or its contribution exceeds Rs. 25 Lakhs.
Private Limited Company/Public Limited Company: Mandatory irrespective of Turnover, Profit, etc. Even in company is incurring loss; statutory audit is required to be conducted.
3. Internal Audit
Listed Company: Mandatory (whether private or Public)
Public Unlisted Company: Internal Audit is mandatory if Turnover is Rs. 200 crore or more, Borrowings is equal to Rs.100 crore or more, paid up share Capital is Rs.50 crore or more, Deposits Rs. 25 crore or more.
Private Unlisted Company: Internal audit is mandatory if Turnover is Rs. 200 crore or more and/or Borrowings is Rs.100 crore or more.
Not mandatory to others except mentioned above.
4. Concurrent Audit
The following branches of Banks, business activities/verticals of a bank may be subject to concurrent audit:
- Branches rated as high risk or above in the last Risk Based Internal Audit (RBIA) or serious deficiencies found in Internal Audit.
- All specialized branches like Large Corporate, Mid Corporate, exceptionally large/very large branches (ELBs/VLBs), SME.
- All Centralized Processing Units like Loan Processing Units (LPUs), service branches, centralized account opening divisions, etc.
- Any specialized activities such as wealth management, portfolio management services, Card Products Division, etc.
- Data Centers.
- Treasury/branches handling foreign exchange business, investment banking, etc. and bigger overseas branches.
- Critical Head Office Departments.
- Any other branches or departments where, in the opinion of the bank, concurrent audit is desirable.
Source: RBI website.
5. Stock Audit
Stock Audit is initiated by bank in 1992 to verify the security offered to the banks against various facilities by an independent authority w.r.t to its adequacy to cover the limits on a particular date. Limit of Stock Audit is fixed by the bank itself. Stock Audit is conducted yearly or Six monthly according to the guidelines of the Bank.
6. GST Audit
If a GST registered business's turnover exceeds the prescribed limit of Rs 5 crore during a financial year, they are subject to audit. The audit is conducted by a chartered accountant or cost accountant. The Commissioner of CGST/SGST or an authorized officer can also perform the audit. The taxpayer will receive a notice at least 15 days before the audit. The audit process must be completed within 3 months from the start date, but the Commissioner can extend it for another six months with written reasons.
The author can also be reached at taxdsj@gmail.com
CAclubindia
