Tax Audit and Income Tax return are two most important accounting terms used at the end of the year. The whole procedure for income calculation and tax payment is carried out in it and this decides the GDP of a nation. Also the income tax is one of the components for calculation of Tax to GDP ratio. This ratio is very important for any nation as it shows the Tax collected by Nation and its proportion in comparison to the size of its economy. Hence a higher tax collection shows that poverty is decreasing among the nation. Also as per research tax revenue of more than 15% of GDP of a nation is considered good.
The returns for the year 2020-21 are to be filed in this period. Hence the Income Tax website is facing a lot of rush. People across the nation are submitting their income tax documents and big firms and professional businesses are also submitting their tax audit. This is a phase of accounting dominance in the Indian domain. Taxation and Audit is one of the most important parts of any nation’s revenue. It makes sure that the country gets its cut from the businesses in a clear way. Hence the Tax Audit and Income Tax fling is given utmost importance in India.
Firstly let’s go through the concept of tax audit and know about it in detail. Tax audit generally carried out by business and professionals. There are certain criteria mentioned which include the business and professional in this procedure.
For instance in case of professionals the gross income earned should be more than 50 Lakh Rs. Similarly in case of business the turnover or gross profit should be more than 1 Crore Rs. Any profession or business falling in such categories have to compulsorily go under tax audit. However it is not mandatory to have the above criteria mentioned to undergo tax audit. Any MSME or small business can also carry on its tax auditing with the Chartered Accountant. Thus it is up to the business (who do not fall into the compulsive category) to undergo tax audit or not.
Basically Tax audit defines that the firm is running in a completely fair way. It mentions that all the business activities undertaken by the entity are legit and all the transactions carried out are correctly recorded. Thus displaying the actual income from the taxpayer and nullifying the scope of any tax evasion. Section 44AB of Income Tax Act is regarding the tax audit procedure itself. If any entity is registered under presumptive taxation scheme than under section 44AD the sales or turnover resulting in excess for 2 crore Rs. requires tax audit.
Income tax is the annual tax a person pays on his or her earrings throughout the year. Incomes from multiple revenue streams are combined and cubed under a person’s account. Later on the income is added and the final amount decides whether the person is eligible for tax payment or not. If yes then what slab would be applicable for the person. Recently the government has rolled out two options for any individual to opt for. The person can adopt any method of tax slab and decide the amount of tax payment based on the same
This is the old tax regime which has been followed since the last 60 years. Under this option there are 4 tax slabs available. The first slab is for earnings till 2.5 Lakh Rs. Any person falling in this category is not bound to pay any tax to the government. Next comes the 2.5 Lakh Rs to 5 Lakh Rs. slab. In this category a person has to pay 5% of his earnings towards the government in the form of income tax. Following this comes the 5 Lak to 10 Lakh Slab. This shows that a person has to pay 20% of his or her earnings towards tax. Lastly any earning above 10 Lakh Rs is taxed at 30%.
As per the new tax regime the bifurcation has become more clear. This is specifically more beneficial for professionals and employees. Under this option any income till 2.5 Lakh Rs is not taxable.
From 2.5 Lakh Rs to 3 Lakh Rs / 3 Lakh Rs to 5 Lakh Rs a tax of 5% is payale. Also a person can gain the rebates listed under section 87a.
From 5 Lakh to 7.5 Lakh Rs 10% tax is payable. From 7.5 Lakh Rs to 10 Lakh Rs, 15% tax is payable.
If the earnings exceed to 10 Lakh Rs – 12.5 Lakh Rs slab then the tax is payable at 20%. From 12 Lakh rs to 15 Lakh Rs 25% tax rate is applicable. Finally on any income earned above 15 Lakh Rs 30% tax is applicable.
A person has the liberty to choose the Tax slab as per his or her needs. The chosen option stays applied throughout the year for the person. Once selected in the beginning no changes can be made to the same.