Tax Audit Required for Law Firm
Yes, Tax Audit required for Law Firm if its turnover exceeds Rs. 1 crore in any of the three preceding years. This is under Section 44AB of the Income Tax Act, 1961.
The audit must conduct by a CA who is register with the Institute of Chartered Accountants of India. The audit report must 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 does impose even if the law firm has no taxable income.
The law firm can avoid the penalty by filing the tax audit report on time. If the law firm has a genuine reason for not filing the tax audit report on time, it can apply for a waiver of the penalty.
Here are some of the reasons that may be considered as a genuine reason for not filing the tax audit report on time:
- Death of a partner or director of the law firm.
- Natural calamities such as floods, earthquakes, or fires.
- Labour problems such as strikes or lockouts.
- Loss of account books or other records.
If the law firm is able to establish that it had a genuine reason for not filing the tax audit report on time, the penalty may be waived.
Here are some of the benefits of filing a tax audit report for a law firm:
- It can help to ensure that the law firm is paying the correct amount of tax.
- It can help to identify any areas where the law firm can improve its compliance with the Income Tax Act, 1961.
- It can help to protect the law firm from tax audits by the Income Tax Department.
- It can help to improve the law firm’s credibility with its clients and other stakeholders.
To visit: https://www.mca.gov.in/
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