Pvt ltd co.

This query is : Resolved

Guest

Guest (Querist)

17 March 2012 Tax Audit is not applicable for a pvt ltd co whose turnover is below the limit mentioned in 44AB. Is this correct?

What is the role of statutory auditor in such a case?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

17 March 2012 1. Yes
2. To audit under Companies Act,1956.

Message likes : 1 times

Guest

Guest (Querist)

27 March 2012 What happens when a director is a foreigner??
I mean what are the provisions applicable??

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
Follow

10 August 2024 Yes, if a Private Limited Company’s turnover is below the limit specified under Section 44AB of the Income Tax Act, then a tax audit is generally not applicable. Let’s break down each part of your question:

### **1. Tax Audit Applicability**

**1.1. **Threshold Limits for Tax Audit (Section 44AB)**
- **Current Limit:** As per Section 44AB of the Income Tax Act, a tax audit is required if the gross turnover or gross receipts of a business exceeds ₹1 crore in a financial year (or ₹10 crore if opting for a presumptive taxation scheme under section 44AD).
- **Turnover Below Limit:** If your Private Limited Company’s turnover is below these thresholds, a tax audit under Section 44AB is not required.

**1.2. **Implications**
- **Non-Applicability:** If the turnover is below the threshold, you are not obligated to have a tax audit. However, the company must still maintain proper books of accounts and file its income tax returns.

### **2. Role of the Statutory Auditor**

**2.1. **Statutory Auditor’s Responsibilities**
- **Audit Scope:** Even if a tax audit is not mandatory, the company must have its annual financial statements audited by a statutory auditor as required by the Companies Act, 2013.
- **Compliance:** The statutory auditor’s role includes ensuring that the financial statements are prepared in accordance with the accounting standards and the Companies Act, 2013.
- **Report:** The auditor will provide an audit report on the financial statements, which is necessary for the annual compliance of the company.

**2.2. **Additional Responsibilities**
- **Internal Controls:** The auditor might also assess the company’s internal controls and compliance with statutory regulations.
- **Recommendations:** They may provide recommendations for improvements, even though a formal tax audit under Section 44AB is not required.

### **3. Provisions When a Director is a Foreigner**

**3.1. **Compliance Requirements**
- **Director’s Eligibility:** Foreigners can be directors in an Indian company, but the company must comply with certain requirements:
- **DIN (Director Identification Number):** The foreign director must obtain a DIN from the Ministry of Corporate Affairs (MCA).
- **FEMA Compliance:** Foreign directors must comply with the Foreign Exchange Management Act (FEMA) regulations concerning foreign investments and transactions.
- **Companies Act Compliance:** The company must adhere to provisions related to foreign directors as specified under the Companies Act, 2013.

**3.2. **Provisions and Requirements**
- **Resident Director Requirement:** As per the Companies Act, 2013, every company must have at least one director who is a resident of India. This means that the foreign director must be part of a board that includes at least one Indian resident director.
- **Board Meetings:** Board meetings must be conducted as per the Companies Act provisions, and foreign directors must adhere to these practices.
- **Taxation and Compliance:** Foreign directors must comply with tax regulations and ensure any income received from the company is declared in their respective home country, adhering to international tax treaties.

**3.3. **Regulatory Requirements**
- **Annual Returns:** The company must file annual returns with the MCA, including details of all directors, irrespective of their nationality.
- **Company Law Compliance:** Ensure compliance with all statutory requirements related to corporate governance, including filing and reporting obligations.

### **Summary**

1. **Tax Audit Applicability:** A Private Limited Company whose turnover is below the limit prescribed in Section 44AB of the Income Tax Act is not required to undergo a tax audit under that section. However, statutory audit as per the Companies Act, 2013, is still mandatory.

2. **Role of Statutory Auditor:** The statutory auditor will audit the company's financial statements as per the Companies Act, 2013, regardless of the tax audit requirements.

3. **Foreign Director Provisions:** A foreign director can be part of an Indian company, provided that the company complies with legal requirements under the Companies Act, 2013, and FEMA regulations. The company must also ensure that at least one director is a resident of India.

For specific advice tailored to your situation, especially regarding compliance and documentation, consulting with a legal or accounting professional is recommended.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now