LLPs AUDIT MANDATES FOR THE FISCAL YEARS 2022–23 AND 2023–24

LLPs AUDIT

LLPs AUDIT MANDATES FOR THE FISCAL YEARS 2022–23 AND 2023–24

LLPs AUDIT

Tax Audit by LLP

Objective

An LLP’s audit largely checks the completeness and quality of the financial and tax-related data disclosed in the LLP’s tax returns. Ensuring conformity with tax rules and regulations is the key goal.

Mandatory Prerequisite

The Income Tax Act of 1961 mandates that LLPs perform tax audits if certain conditions are met, including exceeding a predetermined turnover threshold. LLPs that meet these requirements are required to undergo the tax audit.

Carried out by

A competent chartered accountant or tax expert often conducts a tax audit, which involves reviewing the LLP’s financial documents and tax reports to determine its taxable revenue and spot any inconsistencies.

Report

A tax audit report, also known as Form 3CD, is produced by the auditor at the conclusion of the audit and includes numerous details on the audit’s findings, tax compliance, and other pertinent information.

LLP's audit

LLPs Audit

Objective

For the purpose of determining accuracy, fairness, and compliance with statutory obligations, a statutory audit of an LLP entails a more thorough investigation of its financial statements and accounting records.

Essential Requirement

According to the Limited Liability Partnership Act of 2008 and its implementing Rules, LLPs must perform statutory audits. No matter how much business they do, LLPs must participate in a statutory audit.

Carried out by

The LLP’s partners employ an independent certified chartered accountantto undertake a statutory audit. To give an unbiased evaluation, the auditor’s independence is crucial.

Report

The auditor delivers a Statutory Audit Report following the completion of the statutory audit, which contains an opinion on whether the financial statements provide a true and fair assessment of the LLP’s financial situation and if they are in compliance with applicable laws and accounting standards.

Professionals

A tax audit is necessary if a professional’s gross receipts are greater than Rs. 50 lakhs. A tax audit is necessary if a professional asserts a profit that is lower than the allowed threshold and is eligible for the presumptive taxation plan under Section 44ADA.

Penalty for Noncompliance with Tax Audit

A penalty of 0.5% of the total sales, turnover, or gross revenues, or Rs. 1,50,000, whichever is less, would be assessed if a tax audit is applicable and the assessee fails to have their accounts audited.

Penalty for Noncompliance with Tax Audit

A penalty of 0.5% of the total sales, turnover, or gross revenues, or Rs. 1,50,000, whichever is less, would be assessed if a tax audit is applicable and the assessee fails to have their accounts audited.

Income Tax Return Filing Deadlines for LLPs (FY 2022-23)

LLPs must submit their income tax returns by July 31st even if a tax audit is not necessary. LLPs needing a tax audit are required to submit their income tax returns by September 30. – Even LLPs that did not conduct any activity during the financial year are required to file Nil Income Tax Returns.

Examples of the requirements for LLP audits

Demands for LLP Financial Audits

According to the LLP Act and Income Tax Act, XYZ LLP must have its financial records audited if it earned yearly revenues of Rs. 45 lakhs in the prior fiscal year.

 

Application of Tax Audits for AY 2023–24

Business Example

ABC Enterprises would not need a tax audit if they had a turnover of Rs. 1.2 crores in the assessment year 2023–2024 and their cash transactions made up less than 5% of the total. Regardless of the percentage of cash transactions, they would need a tax examination if their revenue exceeded Rs. 10 crores.

Professional Example

During the assessment year, Dr. Smith, a physician, made gross receipts of Rs. 60 lakhs. Dr. Smith would need a tax audit in this situation because their professional gross receipts surpassed Rs. 50 lakhs.

LLPs Audit

Penalty for Failure to Comply with Tax Audit

Imagine that XYZ Traders, a partnership firm, was qualified for a tax audit but chose not to have their books examined. If their annual sales totaled Rs. 2 crores, they would be subject to a fine of 0.5% of Rs. 2 crores, or Rs. 1,00,000, because this sum is less than the Rs. 1,50,000 minimum penalty threshold.

 

Read More: The Top 10 Red Flags for a Tax Audit

Deadlines for LLPs to file their income tax returns (FY 2022-23)

1. DEF LLP must submit their income tax returns by July 31st even if they did not need a tax audit for the fiscal year 2022–2023 (if required).

2. On the other hand, GHI LLP would have to submit their income tax returns by September 30th if they were subject to a tax audit for the same fiscal year.

3. JKL LLP must still submit Nil Income Tax Returns even if they had no commercial activity throughout the fiscal year.

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MCA – De-criminalisation of Compoundable Offences

1. To initiate the process of decriminalization of compoundable offences under the LLP Act.

2. To introduce the concept of Small LLPs (Limited Liability Partnership) .

3. To allow LLPs to raise capital through Issue of Fully Secured Non-Convertible Debentures.

4. To reduce the additional fee of Rs. 100 per day by suitably amending Section 69 of the LLP Act.

In all, twelve (12) offenses are proposed to be decriminalized and one (1) provision (Section 73) entailing criminal liability is proposed to be omitted. The 12 de-criminalized offenses would then get shifted to IAM thereby de-clogging the criminal courts from routine cases.

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FAQs on LLP Settlement Scheme, 2020 issued by the MCA, Government of India

1 . What is LLP Settlement Scheme 2020?

“LLP Settlement Scheme, 2020?? is a scheme to provide the default LLPs with a One Time relaxation in addition to additional payments by filing pending documents viz. Form Nos 3, 4, 8 and 11 and to serve as a compliant LLP in the future.

2. What is the Objective of the LLP Settlement Scheme 2020?

objective of LLP settlement scheme 2020

As part of the Government’s ongoing efforts to encourage ease of doing business, the Ministry of Corporate Affairs has agreed to implement a scheme called ‘ LLP Settlement Scheme, 2020, ‘ allowing for a one-time cancelation of the delay in filing statutory documents with the Registrar

3.Whether this (LLP Settlement) Scheme is permanent?

No. This is one-time relaxation, as part of the ongoing efforts of the government to encourage business-friendliness, it has been agreed to offer the default LLPs a One-time relaxation in addition to additional fees to make up their default by filing other pending documents and acting as a compliant LLP in the future.

4. What is the time period of this Scheme?

The scheme will come into force on March 16, 2020, and will remain in operation until June 13, 2020 (including both days).

5. What is defaulting LLP as per the Scheme?

“Defaulting LLP” means an LLP registered under the Limited Liability Partnership Act, 2008, which failed to file documents on the due date(s) set out in the LLP Act, 2008 and the rules made therein.

6. Whether an LLP is required to apply to the Registrar in order to avail the Scheme?

Whether an LLP is required to apply to the Registrar in order to avail the Scheme?

No, the defaulting LLPs may themselves avail of the scheme for filing documents that have not been filed or registered in time on payment of additional fees and statutory fees.

7. What shall be the manner of payment of fees and an additional fees are to be charged for filing a late petition to seek protection under the Scheme?

Under the scheme, the LLP shall pay statutory filing fees as specified by the LLP Act and the rules laid down therein along with an additional fee of Rs 10 per day, provided that such additional fee payment does not exceed Rs 5,000/- per document.

8. Whether the additional fee of Rs. 10 per day is aggregate or individual for all forms? 

Rs 10 additional fee per day is charged per document and not in total. Thus, if there is a delay of 300 days for one form and 330 days for another form, then Rs. 3,000 will be applied for the form in which the delay is 300 days and Rs. 3,300 for another form in which the delay is 330 days.

9. Whether the cap of Rs. The 5,000/-Additional fee is for all forms in aggregate or individually?

Cap for an additional fee of Rs 5,000 is applicable per document and not an aggregate. Thus, if there is a delay of 900 days, then the additional fee for the form at the rate of Rs. 10 per day will be Rs. 9,000 which is more than Rs. 5,000 and therefore the additional fee will be Rs. 5,000 for the form.

10. What filing shall the Scheme refer to?

This Scheme Shall be applicable only on filing these following documents

  • Form-3-Details about the Limited Liability Partnership Agreement and changes made therein, if any;
  • Form-4- Notice of appointment, termination, change in name/ address/ designation of a designated partner or partner and consent to become a partner/ designated partner;
  • Form-S; Statement of Account & Solvency (Annual or Interim);
  • Form-11- Annual Return of Limited Liability Partnership (LLP).

 11. Is the scheme applicable for delay in the submission of any form applicable to LLP?

 No. This Scheme shall not be applicable to any form other than Form No. 3, Form No. 4, Form No. 8 and Form No. 11.

12. For which LLPs this Scheme is not applicable?

This scheme shall not apply to LLPs which have made an application to the Registrar in Form 24 for the deletion of their name from the Register pursuant to Rule 37(1) of the LLP Rules of 2009.

13. Documents for which period in the past the default LLP is allowed to file?

‘ Defaulting LLP ‘ is permitted to file late documents that were due for filing until 31 October 2019 in accordance with the provisions of this Scheme.

 14. Is there any immunity from prosecution for documents filed under the scheme?

Yeah, the defaulting LLPs, which filed their pending documents until June 13, 2020, and fixed the default, will not be charged for such defaults by Registrar.

15. What action should Registrar take on the default LLPs which have not availed this Scheme after the conclusion of the same?

At the completion of the Scheme, the Registrar shall take the appropriate action under the LLP Act, 2008 against the LLPs who have not taken advantage of this Scheme and are in default in the timely filing of documents as required by the provisions of the LLP Act, 2008. Registrar can bring litigation against the defaulting LLPs for such defaults.

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