Who Needs an Income Tax Audit and What Happens During It?
An Income Tax Audit is a review of a taxpayer’s accounts to check the accuracy of financial information reported to the Income Tax Department. It helps ensure that books of accounts are properly maintained and that required tax details are correctly reported. Who Needs an Income Tax Audit? Generally, businesses and professionals may need a tax audit when their turnover or gross receipts cross the prescribed limits under the Income Tax Act. For businesses, the threshold is generally ₹1 crore, which can increase to ₹10 crore when cash receipts and cash payments remain within the specified 5% condition. For professionals, the gross-receipts threshold is generally ₹50 lakh. Certain taxpayers who opt out of presumptive taxation can also become liable for an audit. The exact requirement can depend on the nature of income, turnover, cash transactions, and the method of taxation chosen. Therefore, it is important to check the applicable rules for your specific situation. What Happens During an...