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An overview:
As you have heard the name of many other audits like Statutory Audit, Cost Audit, Stock Audit which are governed by the respective laws, Section 44AB of the Income Tax Act, 1961 contain the provisions relating to the Tax Audit.Tax Audit is the audit of the books of accounts maintained by the assessee. It means audit of each and every segment of the books whether it is sale, purchase, expenditures, deductions etc. Tax Audit is not applicable in each and every case. It is mandatory to file only when the conditions mentioned in the section have been met. Tax Audit will be filed by the Chartered Accountant in Practice. Chartered Account will submit the tax audit report in the specific forms as prescribed for the Tax Audit including the observations and adverse remarks if any.Tax audit checks on all the frauds and malpractices in filing income tax returns.
⇒ Mandatory Filing
Tax Audit report will be compulsorily required to be submitted in the following cases:
However, the threshold limit will be “Ten Crore Rupees” if the following conditions are fulfilled:
⇒ Meaning of Profession
As per Rule 6F of the Income Tax Rules 1962, Profession means any of the following:
⇒ Levy of Penalty
If tax audit is applicable to the assessee but assesse does not file the tax audit in the stipulated time period, then penalty will be levied which will be lower from the following:
Two types of tax audit reports are there
This form is used when taxpayer is also governed by any other law other than Income tax Act. For example, Companies are also required to do compliances and get the accounts audited under the Companies Act, 2013. In that case, they are governed by the Company law as well as Income Tax Act.Then the relevant form for the tax audit as per Income Tax Act is Form 3CA, while the prescribed details have to be reported in the Form 3CD.
This form is used when taxpayer has to audit their books of accounts only under the Income Tax Act and not governed by any other law. Then the relevant form for the tax audit as per Income Tax Act is Form 3CB.
Form 3CD is a common format or statementin both the forms 3CA and 3CB. It contains the details that to be filled by the Chartered Accountant while preparing the Tax Audit Report either in Form 3CA or Form 3CB.
Due Date for Filing the Tax Audit
Due date for preparation, submission and filing the tax audit report via prescribed forms is on or before the 30th September of particular financial year. For example, the due date for filing the tax audit report for the financial year 22-23 is 30th September, 2023.
Penalty for Non-Compliance of Tax Audit
If the assessee fails to get the accounts audited by the Chartered Accountant and does not file or any delay in filing the tax audit report, it attracts a penalty of amount which is lower of the following:
However, penalty may be waived off by the Income Tax Authorities if there is a genuine reason for non-filing of audit report or any delay in filing the tax audit report. Among the permitted reasons are:
Limited Liability
Generally in other business if your business fails to pay the dues to your creditors, banks, etc then business owners are liable to pay it from their personal assets but the same is not in case of the company. In case of the company if company fails to pay its dues, then party cannot demand it from the personal assets of the shareholders. Shareholders are liable for only amount they invested at the start of the business. Loss of remaining amount is only suffered by the person who paid the amount to the company
Management and ownership separation
It is a uniquefeature which is available in company only that management and ownership both are the separate. Sometimes business owners only invest and do not manage it or after a period they want to continue to invest in their business and enjoy the profits but handover the management to others like employees, managing partners etc. But issue arises to them is that they continue to liable for the wrongdoings or acts of the person managing the business. But the same is not in the case of the company. In case of the company business owners are not liable at all for the acts of others. The person who is at the fault will be solely responsible for his acts.
Centrally registered
Instead ofstate registration, it is registered with the central government due to which your company is worldwide recognizable, and its data and registration can even be verified from the Government site which make it more trustworthy and reliable.
Management and Reliability
Any person can verify the registration of the company from the website of the Government and the name of the directors which build the confidence in the customers and make the entity more reliable.
Loan availability
There are various criteria of the banks which are checked while sanctioning of the loan and the same is also applicable in the case of the company. But company is preferred over other forms of business as it is registered by Central Government and banks even also provides collateral free loans to the companies..
Foreign Direct Investment (FDI)and Domestic Investment (DI) Allowed
Not all the businesses are allowed to take FDI or DI. But company is allowed to take FDI and DI and invest it in the business which make it easier for the businesses to grow and expand their business easily by getting the investment.
Unique name
As everyone found in India that a same business name is used by various entities which make it difficult for entity to create a brand of their business, expand their business nationwide or worldwide and make difficult for the customer to identify the original entity and other person take its benefit by starting the business with the same name. This issue is tackled by the Company form of business. Once a name registered for the company, it cannot be registered by any other person or entity. Hence businesses enjoy the unique name and avoid the chances of delicacy.
Startup Benefits
Startup is the scheme of the government to give incentives and support the new businesses. Government gives the 3 years income tax exemption to the entity registered under the startup. Reduced the government fee for applying trademark, patent, copyright, etc. Government also made a seed fund specifically for the startups to provide collateral free loans and subsidies. But not every form of business can register itself in the startup. Only Company and LLPare the forms of business which can register and take the benefits of the startups.
Transferability
It is a very important feature of company. When other forms of business are transferred or a partner is introduced in the firm then it requires to surrender the existing registrations including GST, PAN, TAN, EPF, ESI, etc and it will finish the track record of the business but in case of company if the owners want to transfer its business or want to introduce the partner/shareholder, there will be no change in the constitution and no need to surrender existing registrations and apply fresh registrations. It maintains the track record of the company and increases the Goodwill of the company.
Among all, the first step involved for the process of company incorporation is ascertaining the availability of name. A company is identified through its name it registered on the Ministry of Corporate Affairs. Hence choosing an appropriate name is the important and crucial thing.
For the same, an application will be submitted for the reservation of name to the Ministry of Corporate Affairsby login to the sitehttps://www.mca.gov.in/mcafoportal/login.do and preference wise 2 names along with the business objective can be provided. Once the name gets approved, it’s reserved for 20 days within which applicant needs to complete all the remaining process for the incorporation of the Company.
Stakeholders shall ensure that the proposed name selected does not contain any word as prohibited in Section 4(2) & (3) of the Companies Act, 2013 read with Rule 8 of the Companies (Incorporation) Rules, 2014.Points to be considered while suggesting the name:
-Check Trademark for your proposed name on the site https://ipindiaonline.gov.in/tmrpublicsearch/frmmain.aspx
– Check domain for your proposed name on the site https://www.registry.in/index
-Check the availability of Company Name on the site https://www.mca.gov.in/mcafoportal/viewCompanyMasterData.do
Therefore, choosing an appropriate name which does not prohibit any law will be the most important thing.
There is also another way to finalize the name of company and its incorporation in one go i.e., apply name and company incorporation together. However, if the same has been rejected by the MCA, then all the documentation will be done again
Once the name gets approved in PART A, the basic details will be automatically filled in all linked forms of PART B. There will be total 4 linked forms which will be generated such as AGILE-PRO, Spice+ MOA, Spice + AOA and INC-9. These linked forms will be filled up with the necessary details like capital subscription, name of shareholders and directors, percentage of holding among the shareholders, Interest of shareholders in other entities, etc.
For completion of the Part B, many other details and documents will be required which is discussed as below:
For the E-filing of all the forms, Digital Signature is a mandatory requirement. Digital Signature is in form of digital key containing all the information about the registered signatory like name, address, Contact No, Email ID and the authority detail which has provided the certificate. All the forms will signed digitally by the authorized signatory by proving its identity through the Digital Signature Certificates.
Director Identification Number is a unique identification number of 8 digits for the directors of a Registered Company.Every director will be provided a unique number with which he will be identified by the MCA. To become a director, one shall apply for getting the DIN from the MCA.To applying DIN, the applicant has to make an application in e-Form DIR-3 and shall follow the below mentioned process
This form is for GSTIN, Employees Provident Fund Organization registration, Profession Tax Registration, Opening of Bank Accounts, Shops and Establishment registration.
It is mandatory to register for ESIC, EPFO, Professional Tax (for Maharashtra) and bank account opening to obtain AGILE-PRO via e-form, However, GSTIN Registration is optional for the applicants.
MOA is a document which contains all the fundamental information about the company, the objectives of the company in brief, the share capital, type of Shares whether equity or preference and its shareholders details, details of allocation of shares among the shareholders along with their name, address and occupation, etc. Company can perform and undertake only those activities that are mentioned in the objectives of Memorandum of Association beyond which the company cannot undertake any other objective but the Memorandum of Association (MOA) can be amended with the approval of the shareholders.
As per Section 4 of the Companies Act, 2013, Companies shall form MOA as specified in Tables A to E of Schedule -I of the Act. Below is the list of tables with their meaning:
Table A: Company Limited by shares
Table B: Company limited by guarantee and not having a share capital
Table C: Company limited by guarantee and having a share capital
Table D: Unlimited Company and not having share capital
Table E: Unlimited Company and having share capital
Hence Company shall adopt an appropriate table applicable to it as there are various forms of tables for different companies.
AOA defines the rules and regulations that govern the internal management of the company for achieving its objectives.
Various forms in Tables F to J for different companies have been mentioned under Schedule I of the Companies Act 2013 and AOA must be in the respective form.
Table A: Company Limited by shares
Table B: Company limited by guarantee and having a share capital
Table C: Company limited by guarantee and not having a share capital
Table D: Unlimited Company and having share capital
Table E: Unlimited Company and not having share capital
Declaration shall be given by the subscribers and directors in the form INC-9 that:
Once all the above documents and details are ready, then the application for the incorporation of the company can be made via e-form Spice accompanied by Spice MOA and Spice AOA with the registrar under whose jurisdiction the address of the company is located. All these e-forms need to be affixed by the Digital Signatures of the respective persons.
The Registrar of Companies will grant a Certification of Incorporation along with the Copy of PAN, TAN, EPF, ESIC which will be used as for the identity of the company existence.
Once the company gets incorporated then there are many compliances which need to be performed by the company
The Company within thirty days of its incorporation shall furnish to the Registrar of Company regarding verification of its registered office by filing the e-form INC-22.
INC-22 shall be downloaded from the Ministry of Corporate Affairs site and any of the following document will be attached with this form:
Every Company incorporated shall within 180 days of its incorporation shall file the declaration for the Commencement of the Business with the Registrar of Company. It is the declaration regarding that all the subscribers to the MOA have deposited the total value of the shares agreed to be taken by them in the Company Bank Account. Proof for the same shall be attached while filing the form INC-20A. Bank Statement shall be used as the evidence for the same.
COMPLIANCESPRO has a separate team which is expert in completing this complex process very easily and helps you to get the company registered within 3 daysonly in a very reasonable price.
