Discussion On Tax Audit Under Section 44AB Of Income Tax Act



By CA. Parul Gandhi    -   September 5, 2018

Return season takes the days and nights of CA. Government with its move to make Indian business space transparent has made certain amendments in audit form required under Income Tax Act (i.e. tax audit) and hence requires increase in compliance for the CAs and businesses as well.

 

1. What is Tax Audit?

Income Tax Act, 1961 lays down a specific requirement of audit of accounts by an accountant (Chartered Accountant) before the specified date (as mentioned below) and furnishing of the audit report in Form 3CD duly signed and verified containing all the details as required in the form.

 

2. What is the Format of audit report?

The report of tax audit is required to be furnished in Form 3CA where the taxpayer is required to get his accounts audited under any other law/ statute, else it is furnished in Form 3CB.

Also, the particulars and details required and furnished along with the report in Form 3CD

 

Sr. No.

Type of taxpayer

Contour

Threshold limit

Due Date (for AY 2018-19) if limits exceeded

1.

Carrying on business

Sales/ Turnover/ Gross receipts

Above Rs. 1 crore

30 September 2018

2.

Individual carrying on profession other than presumptive business

Gross receipts

Above Rs. 50 lakhs

30 September 2018

3.

Resident individual/ HUF/ Partnership firm (except LLP) carrying on the business and derives profits on presumptive basis from:

  • Plying/ hiring or leasing of  goods carriages
  • Exploration of mineral oils
  • Civil construction

Income

Claims income to be lower than deemed profits or gains

30 September 2018

4.

Resident individual/ HUF/ Partnership firm (except LLP) carrying on the profession and derives  profits and gains on presumptive basis under section 44ADA

Income

Claims income to be lower than deemed profits or gains

30 September 2018

5.

Taxpayer who opted presumptive scheme and opts out within  5 years

Profit and Gains

Lower than 6/8& of Gross Receipts / Turnover/ Sales.

30 September 2018

 

The due date for a person who is required to obtain report of CA in respect of international transaction entered with associated enterprises is 30th November 2018.

 

3. Who is not covered under provision of tax audit?

Non-residents engaged in the business of operation of ships or aircraft.

 

4. Is it compulsory to get accounts audited if taxpayer is liable to under any other law?

No, audit under such law is enough and considered as sufficient compliance. However, such audit should be completed before due date of tax audit.

 

5. Where can you find the format of Form 3CA, Form 3CB and Form 3CD?

Please click on the following links for each of the forms:

  1. Form 3CA and Form 3CD: < https://www.incometaxindiaefiling.gov.in/downloads/offlineUtilities?lang=eng >
  2. Form 3CB and Form 3CD: < https://www.incometaxindiaefiling.gov.in/downloads/offlineUtilities?lang=eng>

 

6. Changes and updates in Form 3CD as compared to form for FY 2016-17 (AY 2017-18)

There have been certain updates in Form 3CD which are effective w.e.f 20th August 2018.

Change No.1 : Addition of Clause 29A:

Nature of income and amount received as an advance on account of negotiations for transfer of a capital asset in case where any amount is forfeited and the negotiations do not result in transfer of capital asset.

Change 2: Addition of Clause 29B.

Nature and amount of income required to be included under the head ‘income from other sources’ unde section 56(2)(x) where an asset is acquired at a value lower than its fair market value or value derived as per Income Tax Rules/

Change 3: Addition of Clause 30A.

Following details w,r,t. primary adjustment to transfer price has been made during the previous year which requires secondary adjustment in the books of accounts:

(i) Clause of section 92CE (1) under which adjustment is made

(ii) Amount of adjustment:

(iii) Where excess money available with the associated enterprise is required to be repatriated to India

A confirmation that such money has been received or the amount of imputed interest income on such excess money not repatriated within the 90 days of filing return of income:

Change 4: Addition of Clause 30B.

Following details on account of thin capitalization provisions i.e. expenditure incurred by way of interest exceeding Rs. 1 crore

(i) Amount of expenditure by way of interest or of similar nature incurred:

(ii) EBITDA) of the previous year

(iii) Amount of expenditure incurred by way of interest exceeding 30% of EBITDA

(iv) Details of any interest expenditure brought forward from previous years

(v) Details of interest expenditure carried forward to succeeding years

Change 5: Addition of Clause 30C.

Confirmation as to whether any impermissible avoidance arrangement has been entered along with following details:

(i) Nature of the impermissible avoidance arrangement:

(ii) Amount of tax benefit arising (aggregate) to all the parties to the arrangement

 

Change 6:

(A) Addition of sub clause (ba) and (bc) in Clause 31

Particulars of each receipt and payment in an amount exceeding Rs. 2 lakhs by way of cash in aggregate from a person in a day or for a single transaction or in respect of transactions relating to one event or occasion from a person

  1. Name, address and PAN
  2. Nature of transaction;
  3. Amount of receipt/ payment and Date

(B) Addition of sub clause (bb) and (bd)

Particulars of each receipt and payment in an amount exceeding Rs. 2 Lakhs in aggregate from a person in a day or in respect of a single transaction or relating to one event or occasion from a person received by a cheque or bank draft which is not an account payee cheque or bank draft

(i) Name, address and PAN;

(ii) Amount of receipt

 

Change 7: Amendment in Clause 34(b) requiring details of Tax Deducted at Source (TDS)

Following details shall be furnished instead of confirmation with respect to tax deduction

  • TAN
  • Type of Form
  • Due date for furnishing
  • Date of furnishing,
  • A confirmation whether the TDS returns contains details about all transactions required to be reported.

 

Change 8: Addition of clause 36A

Details of amount and date for any amount received by shareholder way of loan from investee company (20% or more shares) or loan received by a company/ firm of shareholder in which he holds more than 10% stake from ionvestee company

 

Change 9: Addition of clause 42

Following details by a person who is required to furnish statement in Form No.61 or Form No. 61A or Form No. 61B

  1. Income-tax Department Reporting Entity Identification Number
  2. Type of Form
  3. Due date for furnishing
  4. Date of furnishing,
  5. Confirmation as to whether the Form contains information about all details/ transactions required to be reported

 

Change 10: Addition of clause 43

Following details by taxpayer who itself or its parent or alternate reporting entity is required to furnish the report in respect of international group.

(i) Name of parent entity

(ii) Name of alternate reporting entity

(iii) Date of furnishing of report

 

Change 11: Addition of clause 44

Following information w.r.t GST:

  1. Total amount of Expenditure incurred during the year
  2. Expenditure in respect of entities registered under GST
  3. Expenditure relating to entities not registered under GST
  4. Expenditure relating to goods or services exempt from GST
  5. Expenditure relating to entities falling under composition scheme
  6. Expenditure relating to other registered entities
  7. Total payment to registered entities

 

We hope the analysis mentioned above was useful.

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TheTaxTellers Team