- Section: There is no separate section for Proprietorship Audit. However, the Income Tax Act, 1961 mandates that all entities including Proprietorship must conduct an audit under certain circumstances as per Section 44AB.
- Purpose: The purpose of the Proprietorship Audit is to ensure that the financial statements of the Proprietorship are accurate and comply with the relevant laws and regulations. This helps in providing a fair and transparent view of the financial position of the Proprietorship.
- Applicability: Every Proprietorship is required to conduct an audit under Section 44AB of the Income Tax Act, 1961, if the total sales, turnover, or gross receipts in the previous financial year exceeds Rs. 1 crore. In case of a profession, the limit is Rs. 50 lakhs.
- Timeline: The Proprietorship Audit must be conducted before the due date for filing the income tax return, which is generally July 31st of every year. The audit report must be obtained before the due date of filing of income tax return and should be filed along with the income tax return.
- Exemption: There are no exemptions for Proprietorship Audit under Section 44AB of the Income Tax Act, 1961. However, if the Proprietorship is covered under any other audit, such as a tax audit or a statutory audit, then the Proprietorship Audit can be waived off.
- Penalty for not doing: If a Proprietorship fails to conduct an audit as required under Section 44AB, a penalty of 0.5% of the total sales, turnover or gross receipts, subject to a maximum penalty of Rs. 1,50,000, may be levied.
- Due date: The due date for conducting the Proprietorship Audit is before the due date for filing the income tax return, which is generally July 31st of every year.
- Forms: The audit report must be prepared in Form 3CA and Form 3CD if the accounts of the Proprietorship are subject to tax audit as per Section 44AB. In case the accounts of the Proprietorship are not subject to tax audit but the total sales, turnover, or gross receipts exceed Rs. 1 crore in the previous financial year, the audit report must be prepared in Form 3CB and Form 3CD.
- Reporting authority: The Chartered Accountant (CA) appointed by the Proprietorship will conduct the audit and prepare the audit report. The audit report must be submitted to the income tax department before the due date of filing the income tax return.
- Other details: The Proprietorship Audit includes a thorough examination of the financial statements of the Proprietorship and includes verification of various transactions, expenses, and income. The audit report includes the auditor's opinion on the financial statements and any discrepancies found during the audit process. The audit report must be signed by the CA who conducted the audit and the Proprietor of the business.
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