Expert-Led Audit Process
Chartered Accountants and tax audit professionals ensure your accounts meet all compliance requirements.
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Phone:
+91 9873794257
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Mail us:
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Error-Free Compliance
Identify and correct discrepancies early to avoid penalties and keep your business tax-ready.
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Clear, structured reports that simplify complex audit findings for easy understanding
Local Expertise, Nationwide Reach
Access trusted income tax auditors near you, with reliable support across India.
Tax Audit – An Overview
A tax audit is the process of checking a taxpayer’s books of accounts to ensure they match the rules of the Income Tax Act, 1961. It is a mandatory compliance for certain businesses and professionals. A tax audit professional or Chartered Accountant conducts the verification as per Section 44AB.
Applicability of Tax Audit
You need to undergo an income tax audit if:
- Business turnover exceeds ₹10 crore in a financial year.
- Professional income exceeds ₹50 lakh in a financial year.
If these limits are crossed, an audit of income tax becomes compulsory.
Objectives of a Tax Audit
The main goals of a tax audit include:
- Ensuring books of accounts are maintained properly and verified by an auditor.
- Highlighting any errors, discrepancies, or irregularities in financial records.
- Preparing audit reports in prescribed formats (Form 3CA/3CB and 3CD).
- Confirming income, expenses, and deductions are correctly reported.
- Adding credibility for investors, lenders, employees, and tax authorities.
Why Tax Audit is Important
- Helps businesses stay compliant with the Income Tax Act.
- Builds confidence among stakeholders with verified financial data.
- Assists in accurate tax filing and prevents penalties.
- Ensures smooth handling of deductions and claims.
- Offers financial insights that can support better planning.
Types of Tax Audit
A tax audit checks whether your financial records match your filed returns. Income tax auditors may conduct different types of audits depending on the case:
- Field Audit – Done at the taxpayer’s workplace or office. You’ll need to provide all relevant documents directly to the auditor.
- Office Audit – Conducted at the Income Tax Department’s office. Taxpayers are asked to bring specific records, and the requirements are usually mentioned in a notice.
- Correspondence Audit – Managed through letters or emails. The tax department requests additional or missing documents, which can be sent by post or online.
Accounts Covered Under Tax Audit
An income tax audit applies to different types of accounts, depending on the structure of the business or entity:
- Individual / Sole Proprietorship
- Hindu Undivided Family (HUF)
- Company (Private or Public)
- Partnership Firm
- Association of Persons (AOP)
- Local Authority
Quick Comparison Table
| Type of Audit | Where It Happens | What’s Required |
|---|---|---|
| Field Audit | Taxpayer’s workplace | Provide records directly to auditor |
| Office Audit | Tax Department office | Carry documents as listed in notice |
| Correspondence Audit | By post or online | Send missing or clarifying documents |
Essential Documents Required for Tax Audit
A tax audit involves checking your books, financial statements, and tax details to ensure compliance with the Income Tax Act. To make the audit of income tax smooth and hassle-free, taxpayers must keep the following key documents ready:
Basic Information
- Name and address proof of the assessee
- PAN and Aadhaar details
- GST registration certificate (if applicable)
- Status of assessee under section 2(31) of the Income Tax Act
- Previous year and assessment year details
- Applicable clause under section 44AB
- Nature of business and details of any changes
Business & Taxation Records
- Books of accounts as per section 44AA
- Profit and Loss statements (including presumptive taxation cases under 44AD, 44ADA, 44AE, etc.)
- Method of accounting and any changes made
- Valuation of closing stock
- Particulars of capital assets converted into stock, if any
- Depreciation schedule and related calculations
- Amounts admissible under sections 32, 33, and 35
- Payments made to employees, along with TDS details
- Adjustments required under ICDS u/s 145(2)
Financial Transactions
- Details of loans, deposits, and confirmations
- Transactions covered under section 40A(2)(b)
- Disallowances under section 43B
- Interest payable under MSME Act, 2006
- Brought forward losses and depreciation
- Tax distributions on profit
Supporting Documents
- Management representation letter
- Appointment letter defining audit scope
- List of related parties and transactions
- Trial balance and signed financial statements
- Bank balance confirmations and statements
- Details of sundry debtors and creditors
- Valuation of inventories with inflow/outflow records
- Sample purchase and sales invoices
- Analytical ratio analysis and notes on accounting policies
Quick Reference Table
| Document Category | Examples Included |
|---|---|
| Basic Information | PAN, Aadhaar, Address Proof, GST Registration |
| Business & Tax Records | Books of Accounts, P&L Statements, Depreciation, Stock Value |
| Financial Transactions | Loans, Deposits, 43B Adjustments, TDS, MSME Interest |
| Supporting Documents | Audit Appointment Letter, Bank Confirmations, Invoices |
Procedure of Tax Audit
A tax audit is a step-by-step process where a tax audit professional verifies your accounts and prepares a report as per the Income Tax Act. Here’s how the audit of income tax usually works:
Step-by-Step Process
- Select a Tax Auditor – The process begins with appointing a Chartered Accountant or qualified income tax auditor. Many businesses search for “income tax auditors near me” to find local experts.
- Submit Required Documents – The taxpayer files the relevant form and provides all financial documents to the auditor.
- Verification of Records – The auditor carefully reviews the accounts, supporting papers, and may request additional details for clarity.
- Preparation of Audit Report – Once verification is complete, the auditor issues a report in prescribed forms (3CA/3CB and 3CD), which acts as proof of compliance with income tax laws.
Quick Reference Table
| Step | What Happens |
|---|---|
| Selection of Auditor | A Chartered Accountant or tax professional is appointed |
| Submission of Documents | Taxpayer files required forms and submits financial records |
| Verification of Accounts | Auditor reviews books, transactions, and supporting evidence |
| Audit Report Issued | Auditor prepares and submits the official tax audit report |
Presumptive Taxation and Tax Audit Rules
A presumptive taxation scheme makes it easy for small businesses and professionals to file returns without maintaining detailed books. Still, it has direct links to the audit of income tax if limits are crossed.
Section 44AD – For Businesses
- Applies to businesses with turnover up to ₹2 crore.
- No need to maintain regular books of accounts.
- Income assumed at 8% of turnover (6% if receipts are digital).
- Once chosen, the scheme must be followed for 5 financial years.
- ITR-4 is filed under this scheme.
Section 44ADA – For Professionals
- Applies to doctors, lawyers, architects, and other professionals earning up to ₹50 lakh.
- No books of accounts required.
- Income is assumed at 50% of gross receipts.
- Must be continued for the next 5 years once opted.
Tips to Avoid a Tax Audit
- Keep your accounts as per the Income Tax Act, 1961.
- Compute taxable profit or loss correctly.
- Always report taxable income and allowable losses in ITR.
- Use digital payments where possible to reduce audit risk.
- If needed, consult a tax audit professional or search for income tax auditors near me for expert help.
What Is Included in Turnover?
- Duty drawback from exports
- Income from money lending or forex gains
- Advances received and forfeited
- Excise duty (if applicable)
What Is Excluded from Turnover?
- Sale of fixed assets
- Capital gains from investments
- Rental income from property
- Interest income and reimbursements
Tax Audit Report – Key Forms
A tax audit report is filed in prescribed forms:
- Form 3CA – Used when accounts are already audited under another law.
- Form 3CB – Used when no other audit is required.
Both must be accompanied by Form 3CD, which lists detailed financial information.
Due Date for Tax Audit
For those covered under Section 44AB, the income tax audit report must be filed by 30th September of the relevant assessment year.
Penalty for Non-Compliance
If a taxpayer fails to complete a mandatory tax audit, the penalty is:
- 0.5% of turnover or gross receipts, or
- ₹1,50,000, whichever is lower.
Quick Reference Table
| Section | Eligible Category | Turnover/Income Limit | Presumptive Income % | Presumptive Income % |
|---|---|---|---|---|
| 44AD | Business | Up to ₹2 crore | 8% (6% digital) | ITR-4 |
| 44ADA | Professionals | Up to ₹50 lakh | 50% of receipts | ITR-4 |
How does VyavasayMitra help its client in Tax Audits?
VyavasayMitra has a team of experts and experienced business advisors who will assist and execute the entire Tax Audit. VyavasayMitra helps its client in conducting the Tax Audit by providing services like-
Step-by-step
- Proper analysis of laws & accounts and addresses all queries about Tax Audit.
- Preparation of proper Documents & analysis of reports & statements.
- Ensuring that the company follows the applicable Tax Standards & analysis of Business and Working procedure.
- Ensures that the audit services should be viewed as an investment with medium to long term profits.
Why VyavasayMitra for Tax Audit Services
We at VyavasayMitra have trained professionals to help you throughout the Tax Audit procedure. Our Experts will guide and assist you in the whole process of Audit and related services & also ensures the timely and effective completion of your work. For any queries related to Tax Audit and related services, feel free to contact our experienced and trained professionals at VyavasayMitra.
FREQUENTLY ASKED QUESTIONS
For businesses, an income tax audit is required if turnover crosses ₹10 crore. For professionals, the limit is ₹50 lakh.
A Chartered Accountant can certify up to 60 tax audit reports in one financial year.
A tax audit ensures that accounts are accurate, compliance is maintained, and taxes are calculated correctly. It helps detect errors early.
Factors such as high turnover, unusual expense claims, mismatched returns, or random selection by the department may trigger an audit of income tax.
If mistakes are found, they must be corrected in the audit report. Depending on the issue, penalties or additional tax may apply.
Hiding income, inflating expenses, or keeping unreported cash transactions are common examples of tax evasion.
Missing receipts can weaken your claims. The tax audit professional may disallow such expenses, leading to higher taxable income.
Audit under Section 44AB is a compulsory income tax audit for businesses and professionals crossing the prescribed limits.
Business accounts, professional accounts, partnership firms, LLPs, and certain trusts fall under the scope of audit of income tax.
Businesses and professionals exceeding the turnover or income limits set by law are liable for an income tax audit.
Yes, if your turnover crosses the threshold, you may need an audit of income tax even if there is a loss.