Tax and audit deadlines in India in 2022
Statutory audit
Statutory audit is a type of audit that is mandated by a Statute or Law to ensure that the true and fair view of the book of accounts of a business is presented to the regulators and the public. Unlike internal audit, statutory audits are not optional and must be performed if a business satisfies certain criteria. Qualified Chartered Accountants who are independent of the business must complete statutory audits. Further, the report prepared by the auditor on his/her findings must be presented in the format prescribed by the regulator.
In general, examining bank accounts, financial statements, transactions, bookkeeping records, ledgers, and other critical documents that are submitted for tax purposes and government requirements conduct a statutory audit. It can also include business operations-related documents such as invoices, purchase orders, bills, challans, and more.
Statutory audits can be mainly classified into two types, company audits and tax audits. As per Companies Act, 2013, every company, irrespective of its sales turnover or nature of business or capital must have its book of accounts audited each financial year. Thus, the Board of Directors of a company are required by law to appoint an auditor within 30 days of incorporation and thereafter conduct an audit of its financial statements each financial year. The accounts of a Limited Liability Partnership (LLP) must be audited if it has an annual turnover of Rs.40 lakhs or more or Rs.25 lakhs or more capital contribution. Tax audit on the other hand is required for Proprietorships and Partnership Firms that have crossed a certain threshold of sales.
Types of statutory audit
As per the Companies Act 2013, and Companies (Audit and Auditors) Rules, 2014, the following types of statutory audit exists (but are not limited to):
- Financial audit as prescribed under Section 139 of the Companies Act, 2013
- Cost Audit as prescribed under Section 148 of the Companies Act, 2013
- Secretarial audit as prescribed under Section 208 of the Companies Act, 2013
- Tax Audit as prescribed under Section 44AB of the Income Tax Act, 1961
- GST Audit as prescribed under 35(5) of the GST Act, 2017
- Concurrent audit, branch audit, stock audit, etc. as prescribed under the Banking Act
- Telecom Regulatory Authority of India (TRAI) recommends Billing & Metering Audit
- National Health Mission (NHM) mandates Internal Audit/Concurrent Audit
- Financial audit of banks, insurance companies, cooperative societies, partnership firms, LLPs, proprietorships, HUFs, societies, trusts, etc.
- A performance audit of cooperative societies under the Cooperative Societies Act
- Audit of Stockbrokers and credit rating agencies as prescribed by the Securities & Exchange Board of India (SEBI)
- Internal and concurrent audit for depository operations under the National Securities Depository Limited (NSDL)
What is a tax audit?
There are various kinds of audits being conducted under different laws such as company audit /statutory audit conducted under company law provisions, cost audit, stock audit etc. Similarly, income tax law also mandates an audit called 'tax audit'.
As the name itself suggests, tax audit is an examination or review of accounts of any business or profession carried out by taxpayers from an income tax viewpoint. It makes the process of income computation for filing of return of income easier.
Objectives of tax audit
Tax audit is conducted to achieve the following objectives:
- Ensure proper maintenance and correctness of books of accounts and certification by a tax auditor
- Reporting observations/discrepancies noted by tax auditor after a methodical examination of the books of account
- To report prescribed information such as tax depreciation, compliance of various provisions of income tax law, etc.
All these enable tax authorities in verifying the correctness of income tax returns filed by the taxpayer. In addition, calculation and verification of total income and claim for deductions etc., becomes much easier.
Who is mandatorily subjected to tax audit?
A taxpayer is required to have a tax audit carried out if the sales, turnover or gross receipts of business exceed Rs 1 crore in the financial year. However, a taxpayer may be required to get their accounts audited in certain other circumstances.
According to the Finance Act of 2021, the threshold limit of Rs 1 crore turnover for a tax audit is increased to Rs 10 crore with effect from assessment year (AY) 2021 to 22 (earlier it was Rs. 5 Crore for AY 2020 to 21). If the taxpayer's cash receipts are limited to 5% of the gross receipts or turnover, and if the taxpayer's cash payments are limited to 5% of the aggregate payments.
The below table shows the category of taxpayers with corresponding threshold limit of Audit:
| Category of person | Threshold |
|---|---|
| Business | |
| Carrying on business (not opting for presumptive taxation scheme*) | Total sales, turnover or gross receipts exceed Rs.1 crore in the FY If cash transactions are up to 5% of total gross receipts and payments, the threshold limit of turnover for tax audit is increased to Rs.10 crores (w.e.f. FY 2020-21) |
| Carrying on business eligible for presumptive taxation under Section 44AE, 44BB or 44BBB | Claims profits or gains lower than the prescribed limit under presumptive taxation scheme |
| Carrying on business eligible for presumptive taxation under Section 44AD | Declares taxable income below the limits prescribed under the presumptive tax scheme and has income exceeding the basic threshold limit. |
| Carrying on the business and is not eligible to claim presumptive taxation under Section 44AD due to opting out for presumptive taxation in any one financial year of the lock-in period i.e. 5 consecutive years from when the presumptive tax scheme was opted | If income exceeds the maximum amount not chargeable to tax in the subsequent 5 consecutive tax years from the financial year when the presumptive taxation was not opted for |
| Carrying on business which is declaring profits as per presumptive taxation scheme under Section 44AD | If income exceeds the maximum amount not chargeable to tax in the subsequent 5 consecutive tax years from the financial year when the presumptive taxation was not opted for |
| Carrying on business which is declaring profits as per presumptive taxation scheme under Section 44AD | If the total sales, turnover or gross receipts does not exceed Rs 2 crore in the financial year, then tax audit will not apply to such businesses. |
| Profession | |
| Carrying on profession | Total gross receipts exceed Rs 50 lakh in the FY |
| Carrying on the profession eligible for presumptive taxation under Section 44ADA | 1. Claims profits or gains lower than the prescribed limit under the presumptive taxation scheme 2. Income exceeds the maximum amount not chargeable to income tax |
| Business loss | |
| In case of loss from carrying on of business and not opting for presumptive taxation scheme | Total sales, turnover or gross receipts exceed Rs 1 crore |
| If taxpayer's total income exceeds basic threshold limit but he has incurred a loss from carrying on a business (not opting for presumptive taxation scheme) | In case of loss from business when sales, turnover or gross receipts exceed 1 crore, the taxpayer is subject to tax audit under 44AB |
| Carrying on business (opting presumptive taxation scheme under section 44AD) and having a business loss but with income below basic threshold limit | Tax audit not applicable |
| Carrying on business (presumptive taxation scheme under section 44AD applicable) and having a business loss but with income exceeding basic threshold limit | Declares taxable income below the limits prescribed under the presumptive tax scheme and has income exceeding the basic threshold limit |
What constitutes an audit report?
Tax auditor shall furnish his report in a prescribed form that could be either Form 3CA or Form 3CB where:
- Form No. 3CA is furnished when a person carrying on business or profession is already mandated to get his accounts audited under any other law
- Form No. 3CB is furnished when a person carrying on business or profession is not required to get his accounts audited under any other law
In case of either of the aforementioned audit reports, the tax auditor must furnish the prescribed particulars in Form No. 3CD, which forms part of the audit report.
Penalty of non-filing or delay in filing tax audit report
If any taxpayer who is required to get the tax audit done but fails to do so, the least of the following may be levied as a penalty:
- 0.5% of the total sales, turnover or gross receipts
- Rs 1,50,000
Due date for tax audit
The auditing of accounts, as well as the submission of reports, must be completed on or before the 30 of September of the subsequent financial year.
Transfer pricing report
It is mandatory for all taxpayers, without any exception, to obtain an independent accountant's report in respect of all the international transactions between associated enterprises or specified domestic transactions. The report has to be furnished by the due date of the tax return filing. The report requires the accountant to give an opinion on the proper maintenance of prescribed documents and information by the taxpayer.
Advance income tax payment due dates
Applicable on all taxpayers except for those who opted for presumptive taxation scheme:
| Advance tax payment due date | Advance tax liability |
|---|---|
| On or before 15 June | 15% of advance tax |
| On or before 15 September | 45% of advance tax less advance tax already paid |
| On or before 15 December | 75% of advance tax less advance tax already paid |
| On or before 15 March | 100% of advance tax less advance tax already paid |
Advance tax payment due date for taxpayers who opted for presumptive taxation:
| Advance tax payment due date | Advance tax liability |
|---|---|
| On or before 15 March | 100% of advance tax |
Disclaimer
The Canadian Trade Commissioner Service in India recommends that readers seek professional advice regarding their particular circumstances. This publication should not be relied on as a substitute for such professional advice. The Government of Canada does not guarantee the accuracy of any of the information contained on this page. Readers should independently verify the accuracy and reliability of the information.
Content on this page is provided by Dezan Shira & Associates a pan-Asia, multi-disciplinary professional services firm, providing legal, tax, and operational advisory to international corporate investors.
