Tax Audit checklist for F.Y 2019-20

The Finance Minister while giving the details of the Economic Package announced the extension in the Tax Audit date and the due date to file the Income Tax Return.

But it will certainly increase the efforts of all Professionals after unveiling or relaxing the Lockdown in major area of

• Discussion with Management regarding the impact of COVID -19 on Business
• Disclosure of Policy and Going Concern
• Effect of Events affecting after Balance Sheet Date
• Preparation of Financial Statement and Inventory Valuation
• And lot more measure to be taken care while concluding the Audit for F.Y 2019-20

Some of the Important Points:

1. TDS Implication due to Enhancement in Surcharge:-

Government in Budget (Finance Bill, 2019) increase the limit of Surcharge for higher-income group and specified instances where assessee can not be held as default for short deduction of TDS/TCS.

Further has issued circular No. 08/2020 dated 13.04.2020.

The enhanced surcharge of 25% & 37%, as the case may be, is not levied, from income chargeable to tax under sections 111A, 112A and 115AD.

House Property

2. Amendment Section 23:

This is mainly the key concern of Real E-State Sector, Where the property consisting of any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to 2 Years from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil.

Further, Clause 2 of this section, states that if an Individual is having Two Houses located at different places and fulfilled conditions stipulated then the NAV of both shall be considered NIL.

Trust/Institution

3. Amendment in Section 12AA: (Finance Bill,2019)

Amend provision for Cancellation of Registration of Trust or Institution Section 12AA of Subsection 4 of Clause (a) and (b).

From 01/09/2019.

Business and Profession

4. Amendment in Section 40: (Finance Bill,2019)

• Any Interest which is payable to Resident, and if not paid within specified date then assessee shall have to dis-allow 30% of sum while computing the income. But as per Proviso if assessee satisfies section 201(1) as assessee not in default then, for the purposes of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income.
• The same Proviso has been added for Any interest which is payable to Non-Resident or Outside India through Finance Bill, 2019. Which is otherwise could have to Dis-allowed whole sum paid.
• This is a welcoming amendment.

5. Amendment in Section 43B: (Finance Bill, 2019)

• Sum Payable specified under section 43b(a) to (g) shall be allowed only if actually paid.
• Vide Finance Bill Interest to NBFC is also been added in sum payable specified.
• as interest on any loan or borrowing from a deposit-taking non-banking financial company or systemically important non-deposit taking non-banking financial company, in accordance with the terms and conditions of the agreement governing such loan or borrowing or”;

Capital Gain

6. Amendment in Section 54GB: (Finance Bill, 2019)

• Exempt the Capital gain arises from the transfer of a specified asset by Eligible Assessee and invest the net consideration for subscription of Equity shares of Eligible company, if Company has within a period of 1 year utilized fund for Purchase of New Asset.
• Restriction for transfer of Share or disposed of Asset Purchase - 5 Year.
• Through the Bill the Government has revised useful life of New Asset being Computer or Computer Software acquired by Eligible Start-up from 5 Years to 3 Years.
• Further, In case of Eligible business,the ratio of investment is revised as define in Sub Section 6 of Clause (b) to Sub Clause (iii) Substitute 50% with 25%
• “it is a company in which the assessee has more than 25 per cent share capital or more than 25 per cent voting rights after the subscription in shares by the assessee”

7. Amendment in Section 54: (Finance Bill, 2019)

• On sale of Residential building in India by assessee being Individual or HUF, then Capital gain arises from transfer shall be exempt subject to condition as specified. Exemption which was earlier available with respect to 1 Residential House in India.
• However, vide Bill, 2019 it has been Extended up to Two Residential Houses in India Subject to Capital gain does not exceeds Rs. 2 Crore rupee at his option, for Purchase or Construct.
• One Time option.

TDS Provision

8. Amendment in Section (Finance Bill, 2019)

194A Interest other than Interest on Security

Increase in Limit of TDS deduction to 40,000/- for other than Senior Citizen(S.C) and in case of S.C extend to 50,000/- for Interest payable by Banking Company, Co-Operative Society or deposit with Post office under scheme framed by C.G.

(Senior Citizen aged more than 60 Years)

194I - Rent

Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of rent, shall deduct income-tax thereon at the rate of-

(a) 2% for the use of any machinery or plant or equipment; and

(b) 10% for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings:

Provided that no deduction shall be made under this section where the amount of such income OR the aggregate of the amounts of such income credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed Rs. 2,40,000/-

Increase Limit of 1,80,000 to 2,40,000/-

Mandatory requirement for furnishing of Income Tax Return by Individual:(Finance Bill, 2019)

Sub to

1. Deposit an amount or aggregate amount exceeding Rs. 1 Cr. in one or more Current Account

2. Has Incurred expenditure an amount or aggrt. amount more than Rs. 2 Lacs for himself or any other for travel to Foreign

3. Incurred amount or aggrt. Amount of exceeding 1 lac towards Electricity