Tax Audit Regime: A Quick Backgrounder

• The mandatory tax audit regime was initiated in 1984 with Section 44AB in the Income Tax Act, of 1961 which required certain businesses and professionals to get their accounts audited.
  • Tax Audit aims to ensure compliance with the provisions of the Income Tax Act, 1961, and detect and prevent tax evasion and fraud.
• In 1988, the ICAI limited Chartered Accountants to a specified number of tax audit assignments to ensure quality and reduce the risk of misconduct.
• This limit was part of the guidelines issued in 2008, which replaced previous notifications and were challenged in various High Courts.

Only licensing authority for chartered accountants in India

• Involves theoretical education and practical training under a practising Chartered Accountant.
• Conducted at Foundation, Intermediate, and Final levels, held twice a year in May and November.
• Formulates Accounting Standards (AS), Auditing Standards (SA), and other guidance notes.
• Investigates complaints of professional misconduct against members and takes disciplinary actions.

1. International Federation of Accountants (IFAC),
2. Confederation of Asian and Pacific Accountants (CAPA), and
3. South Asian Federation of Accountants (SAFA).

PYQ:

[2018] With reference to India’s decision to levy an equalization tax of 6% on online advertisement services offered by non- resident entities, which of the following statements is/are correct?

1. It is introduced as a part of the Income Tax Act.
2. Non-resident entities that offer advertisement services in India can claim a tax credit in their home country under the “Double Taxation Avoidance Agreements”.

Select the correct answer using the codes given below:

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2