Let's face it, tax audits are tedious and every entrepreneur tries to avoid any such procedures. But, what if you get a notice regarding tax audits? How much do you know about tax audits? Do you know what to if you get a notice for a tax audit? Even in a city like Bangalore, which is home to many MNCs, many entrepreneurs find themselves at sea after receiving a notice for a tax audit.
In this article, we will discuss what do you need to if you get a notice for a tax audit in Bangalore.
Usually, all tax audit notices or letters have their reasons specified. However, if the reason is not specified then you can ask the reason for the audit. As per section 44 AB of Income Tax Act 1961, usually, a tax audit may take place for the following reasons:
If your cash wages don't match the numbers as provided by you in your report
If your report involves transactions with someone who is being audited
If computer programs detect above average withholding in your returns
If your average turnover exceeds the prescribed limit
Once your reason has been specified you can now focus on the next step.
Now, you have to know about the type of tax audit that you will be going through. So that you can prepare accordingly. There are many types of tax audits and each of these audits has their own requirements.
Statutory Audit: This type of audit occurs every fiscal year (1st April to 31st March) instead of the calendar year (1st January to 31st December). It is conducted in order to report the state of a company? or an individual? finances and accounts to the Indian government.
Internal Audit: This type of audit takes place within the organization at the request of the internal management. It is usually conducted to check an organization? finances and analyze its operational efficiency.
After you have known the type of audit that you might be going through, you will need to find the documents that are relevant to that type of audit. Once you have gathered all your documents, you will have to get them organized before sending them. This will help reduce the hassle in the procedure.
It is not hidden from anyone that we do not know much about tax audits. Hence, we have tax advisors. After receiving the notification of the audit, it would be very vital to contact the tax advisor who had helped to prepare your return. Since she or he knows a lot on the subject matter and can not only explain the process but also help you prepare for it.
This is one of the basics, if you get a notification for a tax audit, then it is very important to hire a professional tax lawyer to help you out. It is especially a necessity if you are facing Statutory Audit.
Now you know what you have to do if you ever receive a notification regarding a tax audit.
For more information, you can check out our article on tax audits.
If you are looking for help regarding tax audits in Bangalore, then you can get in touch with us.