Deadline for Income Tax Audit Report Extended to October 7, 2024

Deadline for Income Tax Audit Report Extended to October 7, 2024

The Income Tax Department has announced an extension for the submission of the income tax audit report for the financial year 2023-24. Taxpayers who were initially required to submit their audit reports by September 30, 2024, can now do so by October 7, 2024. This extension allows additional time for those mandated by law to conduct an income tax audit and file the corresponding report online via the Income Tax e-filing portal.

Significance of the Extension

This extension is crucial as late submission of the tax audit report can result in significant penalties. Taxpayers who miss the deadline could face a fine of either ₹1.5 lakh or 0.5% of their total sales, whichever is lower. Therefore, the new deadline offers some relief for businesses and individuals who need more time to complete their audit obligations.

Official Announcement from the CBDT

The Central Board of Direct Taxes (CBDT) made the announcement on September 29, 2024, through a circular. The circular states:

“CBDT has decided to extend the specified date for filing various audit reports for the financial year 2023-24, which was originally set for September 30, 2024, for assessees referred to in clause (a) of Explanation 2 to sub-section (1) of section 139 of the Income Tax Act. The deadline is now extended to October 7, 2024.“

Read More: Tips for Preparing for a Income Tax Audit

Who Benefits from the Extension?

According to the circular, this extension applies to all taxpayers required to undergo a tax audit. This includes individuals, companies, and other entities whose Income Tax Returns (ITRs) are due by October 31, 2024. Anyone who was originally required to submit their tax audit report by September 30 can now take advantage of the extended deadline and file by October 7, 2024.

For taxpayers who fall under the mandatory audit category, this extension offers crucial extra time to ensure compliance without incurring penalties. Make sure to upload your tax audit report by the new deadline to avoid any late fees or penalties.

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        Who Needs to Conduct an Income Tax Audit and Submit the Report by September 30, 2024?

        Who Needs to Conduct an Income Tax Audit and Submit the Report by September 30, 2024?

        The deadline for eligible taxpayers to submit their income tax audit report on the e-filing ITR portal is September 30, 2024. Not all taxpayers need to meet this deadline, and some may not even be required to undergo an income tax audit. However, failing to file the audit report when required can lead to significant consequences.

        Two key issues arise if the tax audit report is not uploaded on time:

        1. Defective ITR: Your income tax return (ITR) will be considered defective if the audit report is not uploaded.
        2. Penalty: Missing the deadline will result in penalties under Section 271B of the Income Tax Act.

        Who Must Conduct a Tax Audit?

        Income tax audit requirements are governed by Section 44AB of the Income Tax Act, 1961. The deadline for filing the audit report for the financial year 2023-24 (assessment year 2024-25) is September 30, 2024. The rules vary depending on whether the taxpayer is a business, professional, or using a presumptive taxation scheme.

        Businesses:

        A tax audit is mandatory for businesses if:

        • The sales, turnover, or gross receipts exceed ₹10 crores in the previous year.
        • However, if cash transactions (receipts/payments, including sales and expenses) exceed 5% of total receipts or payments, the audit threshold reduces to ₹1 crore.
        • If 95% or more of the business’s transactions are through banking channels, the audit threshold remains at ₹10 crores.

        Professionals:

        Tax professionals need to undergo an audit if:

        • Gross receipts exceed ₹75 lakhs in the previous year.
        • If cash transactions exceed 5% of the total, the audit threshold is reduced to ₹50 lakhs.

        Presumptive Taxation Scheme:

        Taxpayers under presumptive taxation schemes (Sections 44AD, 44ADA, 44AE, 44BB, or 44BBB) must get a tax audit done if:

        • They declare profits lower than what is required under the respective sections.
        • Their income exceeds the basic exemption limit.

        Consequences of Not Submitting the Tax Audit Report

        • Penalty: Failing to complete the tax audit by the due date can result in a penalty, which is the lower of:

          • 0.5% of total sales, turnover, or gross receipts.
          • ₹1.5 lakhs.

          While there are no explicit provisions for filing the tax audit report after the deadline, it may be possible to file the report belatedly. However, late filing will likely attract a penalty.

        • Defective ITR: If the tax audit report is not filed even after the deadline (even with a penalty), the tax authorities may treat your income tax return as defective. Filing the tax audit date is mandatory in the ITR form, and failure to do so can lead to this issue.

        Extended Deadline for Transfer Pricing Cases

        For taxpayers required to file a Transfer Pricing report in Form 3CEB, the deadline to submit the tax audit report is extended to October 31, 2024.

        Read More: Vivad Se Vishwas 2.0: Reduced Settlement for Declarations Filed by December 31

        Taxpayers Exempt from a Full-Fledged Audit

        If you fall under any of the categories requiring a tax audit, ensure that your audit is completed and the report is uploaded by the September 30, 2024 deadline to avoid penalties and issues with your ITR filing. Make sure to consult your accountant or tax professional to confirm whether or not you need to conduct a tax audit and meet the filing requirements.

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              Tips for Preparing for a Income Tax Audit

              Tips for Preparing for a Income Tax Audit

              Preparing for a tax audit can be stressful, but with the right approach, you can navigate the process smoothly. Here are some practical tips to help you get ready and ensure you’re well-prepared.

              1. Stay Organized from the Start

              Good organization is key. Keep your financial records well-organized and accurate from the beginning. Implement a filing system for receipts, invoices, bank statements, and any other relevant financial documents.

              2. Review Your Tax Returns Thoroughly

              Go over your tax returns for the audit years carefully. Make sure you fully understand what you reported and check for any discrepancies or mistakes that may need clarification.

              3. Gather Supporting Documentation

              Collect all necessary documents, including income statements, expense receipts, and proof of tax deductions. Having these records readily available will help substantiate your claims.

              4. Reconcile Your Accounts

              Ensure your financial accounts, such as bank and credit card statements, are fully reconciled. The figures should match the information reported on your tax returns to avoid inconsistencies.

              5. Understand the Focus of the Audit

              Identify which areas the tax audit will focus on, whether it’s income verification, deductions, or tax credits. Knowing this in advance allows you to target your preparation more effectively.

              6. Be Prepared to Explain Unusual Transactions

              If you’ve made any large or unusual transactions, be ready to explain them. Provide documentation and reasoning to support these entries if questioned.

              7. Consult a Tax Professional

              If you haven’t already done so, consult with a tax expert. They can offer valuable advice and even represent you during the audit process, easing the burden.

              8. Maintain Honesty and Transparency

              Always be upfront with tax authorities. Providing honest information can prevent further complications and potential penalties down the road.

              9. Prepare for Potential Outcomes

              Be aware that the audit could lead to changes in your tax liability. Know your options, such as appealing any adjustments if you disagree with the results.

              10. Communicate Clearly and Respectfully

              Maintaining clear, respectful, and cooperative communication throughout the audit process can help things go more smoothly and minimize stress.

              11. Keep a Record of Communications

              Document all your interactions with tax authorities, including emails, letters, and phone calls. This will come in handy for reference in case of disputes or follow-up actions.

              12. Know Your Rights

              Familiarize yourself with your rights during the audit process. You have the right to understand the audit findings and to appeal if you disagree with the outcome.

              Read More: Restrictions on Cash Payments under the Income Tax Act

              13. Engage a Chartered Accountant

              Hiring a Chartered Accountant to guide you through the audit will make the process more manageable. They can ensure compliance, provide expert advice, and represent you during interactions with tax authorities.

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