Tax audit:
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A taxpayer having a turnover or gross receipts more than 1 Crore is liable for tax audit for that financial years.
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Please note that with effect from FY 2020-21,
The threshold limit for audit has increased from 1 crore to 5 crores, but there is a condition.
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The condition is your total cash payments should be restricted to 5% of the total cash payments and total cash receipts should be limited to 5% of the gross turnover.
Report to furnished in Tax Audit
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Form 3CA: When a person carrying on business or profession is required to get his accounts audited under any other law.
For Eg: If you are a Company, then you have to get your accounts audited even under Companies Act as per the details mentioned below. So here Form 3CA is applicable.
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Form 3CB: When a person carrying on business or profession is not required to get his accounts audited under any other law.
For eg: An individual is not covered under Companies act. In that case, form 3CB is applicable.
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Other Audits applicable to Companies:
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For companies, by default Statutory Audit is applicable. This is the audit applicable as per Companies Act, 2013. So ensure that even if your Turnover is Nil, you have to furnish audit report as per the Schedule III of Companies Act long with Auditors report, notes to accounts and directors report.
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Other Audits applicable to LLP:
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Tax audit limit LLP is mentioned above. However, LLP Audit is also applicable as per the turnover criteria.
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If the contribution given by partners in LLP exceeds Rs. 25 lacs or the turnover exceeds 40 Lacs during the Financial year, then LLP Audit is applicable as per LLP Act, 2008.
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Penalty:
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For tax audit:
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0.5% of turnover or gross receipts or 150000/- whichever is less. This is not a mandatory penalty, if the assessing officer is satisfied with the reason given for late furnishing of report, the penalty can be waived.
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GST Audit:
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Audit under GST involves examination of records, returns and other documents maintained by a GST registered person. It also ensures correctness of turnover declared, taxes paid, refund claimed, input tax credit availed and assess other such compliances under GST Act to be checked by an authorised expert.
GST is a trust-based taxation regime wherein a taxpayer is required to self-assess his tax liability, pay taxes and file returns. Thus, to ensure whether the taxpayer has correctly self -assessed his tax liability a robust audit mechanism is a must. Various measures are taken by the government for proper implementation of GST and audit is one amongst them.
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Turnover-based Audit under Section 35(5) of CGST Act
If the annual turnover of a registered taxpayer is more than Rs. 2 crores^ in a financial year , he is required to get his accounts audited by a Chartered Accountant or Cost Accountant every year.
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A financial year covers the 12-month period beginning from April of a calendar year to March of the next calendar year.
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Special Note: For the purpose of finding out the turnover limit for Financial Year 2017-18, it has been clarified in the government’s press release dated 3rd July 2019. It shall cover the period 1st July 2017 to 31st March 2018 and excludes the first quarter of FY 2017-18.
For businesses with an annual turnover of less than Rs 5 crore, filing of GSTR-9C for FY 2018-19 is waived off.
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Aggregate turnover is calculated as follows:
Aggregate turnover = Value of all taxable (inter-state and intra-state) supplies + exempt supplies + export supplies of all goods and services
The total turnover calculation must be PAN-based, which means that once the turnover under the PAN is more than Rs. 2 crores all business entities registered under GST for that PAN will be liable for GST audit for a financial year.