Audit Under Income Tax Act, 1961

Tax Audit

  • Tax Audit is an audit made compulsory by the Income Tax Act, if the turnover/gross receipts of the assessee reaches the specified limit (Section 44AB/44AD/44AE/44AF/44BB/44BBB/44ADA).
  • It is carried out by a Chartered Accountant.
  • The purpose is to ensure proper maintenance of books of accounts and they truly reflect the taxable income of the assessee.
  • Form 3CA/CB (as may be applicable) & 3CD is required to be issued by the Auditor.

Transfer Pricing Audit

  • A transfer pricing study examines the pricing of transactions between related two or more associates.
  • It is determined whether the transactions are conducted under market conditions and survive the scrutiny of the IRS and other tax authorities.
  • All Indian companies are required to analyze their international transaction with respect to the Transfer Pricing Regulation and adhere to it by maintaining proper transaction records and documents.
  • All income acquired by the company by means of any international transaction shall be calculated at arm’s length price.
  • There are various methods introduced by the Central Board of Direct Taxes, generally known as the ‘Board’. Some of them include the resale price method, cost plus method, comparable uncontrolled price method, and transactional net margin method.
  • At the end of a financial year, the person or group involved in an international transaction should submit the report of it in Form 3CEB under the guidance of a Chartered Accountant. This form has to be filed before he files the Income Tax return of the same period.

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