Tax Audit Applicable for Law Firms
Yes, tax audit is applicable for law firms if the turnover of the law firm exceeds Rs. 1 crore in any of the three preceding years. This is under Section 44AB of the Income Tax Act, 1961.
The audit conducted by a chartered accountant who registered with the Institute of Chartered Accountants of India.
The audit report must be file with the Income Tax Department within six months of the end of the financial year.
The tax audit report required to verify the accuracy of the law firm’s accounts and to ensure that the law firm has paid the correct amount of tax. The audit report will also look at the law firm’s compliance with the Income Tax Act, 1961.
If the law firm fails to file the tax audit report, it will be liable to a penalty of:
- 0.5% of the total sales, turnover, or gross receipts, whichever is lower, or
- Rs. 1,50,000, whichever is lower.
The penalty is imposed even if the law firm has no taxable income.
Here are some of the reasons why a law firm may be requir to get its accounts audit:
- The law firm’s turnover exceeds Rs. 1 crore in any of the three preceding years.
- The law firm is involve in certain high-risk activities, such as trading in securities.
- The law firm has been involve in any tax disputes in the past.
- The law firm has been recommended for audit by the Income Tax Department.
If you are a law firm and you are unsure whether you required to get your accounts audited, you should consult with a tax advisor.
To visit: https://www.mca.gov.in/
For further details access our website: https://vibrantfinserv.com