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Title: Compulsory Tax Audits for Proprietors, Companies, and LLP: A Comprehensive Guide

 Introduction:

In this article, we will explore the various types of compulsory audits that proprietors, companies, and Limited Liability Partnerships (LLPs) need to undergo. Understanding these audits is crucial for business owners and professionals. We have simplified the information to make it easily understandable. Read on to learn more.

 1) Income Tax Audit:

Under the Income-tax Act, of 1961, a tax audit is mandatory for certain individuals and entities. Recent updates from the Budget 2021 have raised the tax audit limit for those conducting 95% of their transactions digitally to Rs. 10 crores. The criteria for tax audit are as follows:

 i) Person Carrying Business: If the total sales, turnover, or total receipts exceed Rs. 1 crore (except if receipts are received digitally and sales/turnover do not exceed Rs. 2 crores, in which case profit can be assumed to be 6%).

ii) Profession Carrying Person: If the total receipts exceed Rs. 25 lakhs (except if receipts do not exceed Rs. 50 lakhs, in which case a person can opt for presumptive income that is 50% higher).

 Note: Tax audit reports must be filed by 30th September each year. The provisions of Section 44AD and Section 44ADA apply only to resident persons, HUFs, and partnership firms (excluding LLPs).

 2) Statutory Audit:

The requirement for a statutory audit varies based on the type of entity:

Individual / HUF / Partnership Firm: No statutory audit is required.

LLP: Statutory audit applies if the turnover in any financial year exceeds Rs. 40 lakhs or if the contribution is more than Rs. 25 lakhs.

Private Limited Company / Public Limited Company: Statutory audit is mandatory regardless of turnover or profit. Even if the company is incurring losses, a statutory audit is required.

 3) Internal Audit:

The need for an internal audit is determined by the nature and size of the company:

Listed Company: Internal audit is mandatory for both private and publicly listed companies.

Public Unlisted Company: An internal audit is mandatory if the turnover exceeds Rs. 200 crores, loans exceed Rs. 100 crores, and paid-up share capital is over Rs. 50 crore or deposits are more than Rs. 25 crores.

Private Unlisted Company: Internal audit is mandatory if the turnover exceeds Rs. 200 crores and/or debt is over Rs. 100 crores.

 4) Concurrent Audit:

Concurrent audits are typically conducted for specific branches or departments of banks:

High-risk or higher-rated branches based on the latest Risk Based 5) Internal Audit (RBIA).

Specialized branches, centralized processing units, asset management departments, data centres, treasury/branches handling foreign exchange business, and more.

Concurrent audits may be required for other branches or departments as deemed necessary by the bank.

 5) Stock Audit:

Stock audits are conducted by banks to verify the security offered against various facilities. The frequency of stock audits is determined by the bank and can be annual or bi-monthly.

 For more detailed information on these audits and their applicability,

 Contact Alliance Tax Experts for expert tax consultation and audit services.

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