Understanding Tax Audit Applicability — a review of a business's or professional's accounts required under the Income Tax Act once turnover or receipts cross specified thresholds — starts with knowing exactly what the process involves. Here's a step-by-step breakdown for businesses and professionals crossing the applicable turnover/receipts threshold.
Step 1
Determine applicability based on turnover/receipts thresholds.
Step 2
Engage a Chartered Accountant to conduct the audit.
Step 3
Provide books of account and supporting documents for review.
Step 4
File the tax audit report before the applicable deadline.
Documents to Keep Ready
Before starting, it helps to have these ready so the process moves without unnecessary back-and-forth:
- Books of account maintained through the year
- Turnover or gross receipts computation
- Reconciliation of cash and digital transactions
- Supporting vouchers and invoices for major expenses
- Prior year's tax audit report for reference
- Details of any related-party transactions
What to Watch Out For
Not tracking turnover through the year to anticipate applicability — this is one of the most frequent slip-ups at this stage, so it's worth double-checking before you proceed.
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