What is tax Audit ?

There are various kinds of audit being conducted under different laws such as company audit/statutory audit conducted under company law provisions, cost audit, stock audit etc. Similarly, Income tax law also mandates an audit called ‘Tax Audit’. As the name itself suggests, Tax audit is an examination/review of accounts of any business /profession carried out by the taxpayer from an income tax viewpoint. A Tax audit makes the process of income computation for filing of return of income, much easier.

Objectives of tax audit

Tax audit is conducted to achieve the following objectives:

  • Ensure proper maintenance and correctness of books of accounts and certification of the same by tax auditor.
  • Reporting of observations/discrepancies noted by tax auditor after a methodical examination of books of account.
  • Reporting prescribed information such as tax depreciation, compliance of various provisions of income tax law etc. This in turn enables and also saves time of tax authorities in verifying the correctness of income tax return filed by the taxpayer such as total income, claim for deductions etc.

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