Taxpayers with an annual income of one crore or more must have their accounts audited.
One of the most frequently asked questions is whether a return may be filed without being audited.
As July unfolds, taxpayers start collecting documents to file their Income Tax Return. With numerous changes to tax rules, we also have many questions about the possibility of filing a return without undergoing an audit. One of the most commonly asked queries pertains to the requirement of audits for certain types of taxpayers and the circumstances under which exemptions may apply. Understanding the implications of an unaudited tax return is also of great significance.
CA Girish Narang, an expert in tax matters, has provided valuable insights to address the numerous queries surrounding income tax return (ITR) filing. He emphasizes that different income earners have specific ITR forms designed for their respective needs. For salaried individuals, the process is relatively straightforward, as they can utilise the simplified ITR form tailored to their requirements, known as the easy form.
Who Needs To Complete Form 3?
According to Girish Narang, taxpayers who earn a living through a company or profession are required to file Form 3 under Section 44AB of the Income Tax Act. Such taxpayers should have their accounting books audited by a qualified accountant. CA will go through it and double-check all of the details. This will necessitate details on the taxpayer’s receipts and earnings.
According to the CA, taxpayers with an annual income of one crore or more must have their accounts audited. If a taxpayer submitting ITR Form 3 earns more than 8% profit, he will not be audited under sections 44AD and 44AB. If this occurs, you must pay tax on your earnings following the tax slab.
In the 2021 budget, Finance Minister Nirmala Sitharaman stated that taxpayers who fill out ITR Form 3 and conduct 95% of their transactions digitally will not be audited for earnings up to Rs 10 crores. If a company taxpayer elects to use the presumptive taxation plan under Section 44AD, he must complete ITR Form 4.
You know when the notice will be sent and who is exempt from being audited. However, for those who require auditing, the information is quite beneficial. If a taxpayer declares less than 8% of their income from a profit business and their yearly income exceeds Rs 2.5 lakh, an audit would be required. Also, if you work and your annual salary exceeds Rs 2.5 lakh. Apart from that, even if you declare less than 8% profit from the firm, the account must be audited.
If taxpayers fail to have their returns audited or file their taxes without being audited, they may receive an income tax notice. According to the CA, if ITR Form 3 is not audited, a penalty may be applied. This fee can be levied up to 0.5% of total revenue or Rs.1.5 lakh, whichever is less.
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