The term audit stands for inspection, review or check, so tax audit means when the filled tax is under inspection. There is a tax audit when the Indian Revenue Service (IRS) decides that your tax should be examined and income deduction verified. Tax return comes under audit only when there is something out of the ordinary in your filings.
|Sale/purchase of fixed asset|
|Sale of assets held as investments||Interest income from money lenders|
|Rental income||Foreign fluctuation income|
|Residential property||Excise duty included in turnover|
The final goal of any business is to make financial profits but it should be done appropriately without any suspicious profits. One must always remember the following points to be on the safer side:
A Tax Audit is an examination of one’s Tax Return to verify that one’s declaration of income and deductions are accurate. In India, Tax Audit is compulsory under the Income Tax Act (if only the total turnover exceeds the prescribed limits).
Tax audit ensures that the books of account and other records are properly maintained, that they truly reflect the income of the taxpayer and claims for deduction are correctly made.
The main objective of tax audit is to ascertain/derive/report the requirements of Form Nos. 3CA/3CB and 3CD.
The form prescribed for audit report in respect of audit conducted under section 44AB is Form No. 3CB and the prescribed particulars are to be reported in Form No. 3CD. The persons who are required to get their accounts audited by or under any other law, the form prescribed for audit report is Form No. 3CA/3CB and the prescribed particulars are to be reported in Form No. 3CD.