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Tally.ERP 9 Auditors’ Edition Tax Audit (Sec 44AB of IT Act)

Tally.ERP 9 Auditors’ Edition Tax Audit (Sec 44AB of IT Act). Agenda. Tax Audit under Sec 44AB using Tally.ERP 9 AE Benefits Definition & Audit Objective Audit & Analysis-Features Clause 16, 17h, 18, 21, 24a, 24b & 27 Forms 3CD, 3CA & 3CB. Benefits.

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Tally.ERP 9 Auditors’ Edition Tax Audit (Sec 44AB of IT Act)

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  1. Tally.ERP 9 Auditors’ EditionTax Audit (Sec 44AB of IT Act)

  2. Agenda • Tax Audit under Sec 44AB using Tally.ERP 9 AE • Benefits • Definition & Audit Objective • Audit & Analysis-Features • Clause 16, 17h, 18, 21, 24a, 24b & 27 • Forms 3CD, 3CA & 3CB

  3. Benefits • The Tally.ERP 9 AE aids Auditors to perform a Tax Audit • Enables exceptional reporting – saves time and cost • Preform audit to generate annexures for 7 clauses supported under Sec 44AB with ease • Review / scrutiny of relevant cash and unusual transactions • Determine timely remittance of statutory dues • Aids in preparing Form 3CD, 3CA, 3CB

  4. Definition & Audit Objective • Audit of certain persons under Sec 44AB of the Income Tax Act • whose total sales, turnover or gross receipts, as the case • may be, exceed(s) the following limits: • Businesses : Profits and Gains more than Rs.40 lakhs per annum • Professionals : Gross receipts above Rs.10 lakhs per annum • (Note: The limits have been increased to Rs.60 lakhs for businesses • and Rs.15 lakhs for professionals from FY2011-12) • Audit Objective: • Verify compliance with provisions of Sec 44AB of the IT Act • Confirm accounting records are maintained properly and reflect • the true income of the assessee

  5. Audit & Compliance Menu Tally Main -> Gateway of Tally Open Tally.ERP 9 Auditors’ Edition. Select the required Company to display Gateway of Tally. Select Audit & Compliance under Audit to access the audit features.

  6. Access to Audit & Compliance Menu When the Client activates the Security Control – Scenario 1 • Click Alt+F3:Cmp Info in Gateway of Tally to display the Company Alteration screen. • Under Security Control: • Select Yes for Use Security Control • Enter details for Name of • Administrator & • Password fields • Accept and save the entries.

  7. Access to Audit & Compliance Menu When the Auditor provides the access details – Scenario2 Accept and save the login details for access. • Click Audit & • Compliance in Gateway of Tally screen to • display Company Alteration- Enable Security screen. • Enable access to use audit features by entering: • Name of • Administrator • Password

  8. Tax Audit Menu Tally Main -> Gateway of Tally->Audit & Compliance The Audit & Compliance Menu with the available features. • The menus under • Tax Audit are: • 44AB Audit • Form 3CD • Form 3CA • Form 3CB

  9. Tax Audit Dashboard Gateway of Tally > Audit & Compliance > Tax Audit □ Clause No. in Form 3CD □ Description of the clause under audit □ No. of unaudited Vouchers □ No. of audited Vouchers □ No. of Vouchers under observation □ No. of Vouchers requiring clarifications from client □ No. of clarified Vouchers for re-audit □ No. of altered Vouchers for re-audit □ Audit Status

  10. Cl. 16- Payment of Statutory Dues Verify employee contributions towards statutory funds (PF,ESI,etc), employee bonus and commission payments. Use the Bonus, PF , ESI Recoveries feature to verify remittance of statutory dues in time to Government To perform the audit under this clause, the Payroll option in F11:Features in Tally.ERP 9 has to be enabled and the payroll transactions have to be accounted

  11. Cl. 16- Payment of Statutory Dues Verify information in the Masters created in the Client payroll data. Determine the pay heads created in payroll masters Click F5: Masters to know these payroll masters

  12. Cl. 16- Payment of Statutory Dues Verify PF,Bonus & other Statutory dues- Employee & Employer, Charges, Payment Status. View a snapshot of the monthly PF related payments, charges, due dates, etc. Click F6: Payment Summary to know the monthly deductions and charges information. Find if payments are made in time.

  13. Cl. 16- Payment of Statutory Dues Know the exceptions in Clause 16 – Dues paid late or partially paid. View the late/partial payments of statutory dues to concerned authorities. Click Alt+X: Exceptions to display such exceptions.

  14. Cl. 16- Payment of Statutory Dues Configure report display under the clause as per requirements. • Configure display of details under Cl. 16 as per requirements: • Click F12: Configure to display details of: • PF • ESI • Prof Tax • Bonus • Voucher Audits

  15. Cl. 16- Payment of Statutory Dues Audit transactions easily. • In the Audit Details screen: • Select required status under Audit Status • Enterremarks under Audit Note. Tally MAIN> Gateway of Tally > Audit & Compliance >Tax Audit > Employees Deduction > Payroll Monthly Summary. Execute above steps: & Select transaction(s) by pressing Spacebar/Ctrl+Spacebar (To select all transactions) . Click F9:Audit to perform the audit. • Values for Audit Status are: • Unknown • Disallowed • Late Paid • Need Clarification • Paid on Time • Under Observation

  16. Printed Annexures to Form 3CD Clause 16: Click Alt+P in Bonus, PF, ESI Recoveries

  17. Cl. 17h- Amounts inadmissible u/s 40A(3) Verify and disallow payments aggregating and above prescribed cash limits Click F11:Features in Cash Payments screen. The Company Operations Alteration screen is displayed. Audit rule under Inadmissible Cash Payments U/s 40A (3) is defined. Define new value if required.

  18. Cl. 17h- Amounts inadmissible u/s 40A(3) Exclude ledger account(s) for which cash payments aggregating to Rs.20000 in a day are allowed. Click Ctrl+F9:Master button in Cash Payments screen. Select the ledger account in Select Ledger screen. Exclude the ledger account in Ledger Alteration screen from the scope of audit under Rule 6DD of IT.

  19. Cl. 17h- Amounts inadmissible u/s 40A(3) Define amount range for selecting transactions for audit of cash payments in a day. Click F10: Range wise to display the Lowest and Highest ranges and the numbers of cash payment vouchers. Click F6: Amount wise to define new values for the Lowest and Highest range of cash payments. Define new amount range as per requirements.

  20. Cl. 17h- Amounts inadmissible u/s 40A(3) Verify if the Client has issued Bearer Cheques to suppliers. Click Alt + B: Bank Summary to display ledger payments through the bank account. Specify payments made by bearer in consultation with client.

  21. Cl. 17h- Amounts inadmissible u/s 40A(3) Configure the display of details in the feature. • Configure the following display details: • High/Low value vouchers • Limit for displaying cash payments • Display of low valued payments

  22. Cl. 17h- Amounts inadmissible u/s 40A(3) Select the required Ledger Account’s cash payment for audit. • Click F9:Audit to audit • Transactions. • In the Audit Details screen: • Select required status under Audit Status • Enter the appropriate value under Amount • Enterremarks under Audit Note. • Values available for AuditStatus are: • Unknown • Allowed • Disallowed • Need Clarification • Under Observation

  23. Printed Annexures to Form 3CD Clause 17(h): Click Alt+P in Amounts Inadmissible under u/s 40A(3): Contd…

  24. Cl. 18- Payments to Specified Persons Verify and disallow expenses/payments made to specified persons if found to be excessive/unreasonable You can alternatively configure the ledger accounts as Specified Persons through ledger creation under Masters menu. The Payments to Specified Persons details display after related party configuration. -Sec 40A (2) (b) Configure the display details through F12: Configure. -Sec 40A (2) (b) Configure the ledger accounts in Related Party Configuration screen as per discussions with the Client. Click F9:Update to configure. Configure the display details under Other Information in Ledger Alteration screen. Click F12: Configure. Select Yes against Use Other Information for Ledger Accounts. Use the Payments to Specified Persons feature to audit excessive and unreasonable payments made to specified persons. Click Ctrl+F9: Master and select the appropriate ledger accounts in consultation with the Client from the Select Item screen.

  25. Cl. 18- Payments to Specified Persons Auditing Payments to Specified Persons. • Values are available for Audit Status. • Unknown • Need Clarification • Not to be Reported • To be Reported • Under Observation Select required ledger vouchers for audit. Click F9 : Audit to audit. Select required status under Audit Status. Enter values under Amount, Nature of Payment. Record appropriate remarks under Audit Note.

  26. Printed Annexures to Form 3CD Clause 18 : Click Alt+P in Payments to Specified Persons u/s 40A(2)(b) Contd…

  27. Cl. 21- Payments Under Section 43B Verify if sums collected, referred in clauses (a-f) of Sec 43B (employer related statutory deductions/taxes), are remitted to the Funds/Govt before the due date of filing the tax return To perform the audit under this clause, the Payroll option in F11:Features in Tally.ERP 9 has to be enabled and the payroll transactions have to be accounted Use Payments Under Section 43B feature to audit timely remittance of statutory dues to various Funds/Govt.

  28. Cl. 21- Payments Under Section 43B Verify payments referred in clauses (a-f) of Sec 43B (employer related statutory deductions/taxes) are remitted in time. Execute the steps: Tally MAIN > Gateway of Tally > Audit & Compliance > Tax Audit > Service Tax Payable Summary > Service TaxMonthly Summary > Service Tax Payment Vouchers to view the timely payment of Service Tax for the selected month. Enable the Service Tax/TCS and other tax features in F11:Features under F3; Statutory in default Tally.ERP 9 before auditing transactions under Cl.21. Execute the steps: Tally MAIN > Gateway of Tally > Audit & Compliance > Tax Audit > TCS Payable Summary > TCSMonthly Summary > TCS Payment Vouchers to view the timely payment of TCS for the selected month.

  29. Cl. 21- Payments Under Section 43B Audit of payments of statutory levies (e.g.TCS)under Sec 43B. Select required ledger vouchers for audit. Click F9 : Audit to audit. Select required status under Audit Status. Record appropriate remarks under Audit Note • Values for Audit Status available are: • Unknown • Audited • Need Clarification • Under Observation

  30. Printed Annexures to Form 3CD Clause 21: Click Alt+P in resp. screens(for e.g., Employer’s Contributions) Contd…

  31. Cl. 24(a)- Loans / Deposits Accepted-Sec 269SS Verify acceptance of loans and Deposits aggregating to and exceeding prescribed cash limits during the previous year. Use 24(a) – Loans / Deposits Accepted feature to find cash receipts (loans & deposits) accepted aggregating to and exceeding prescribed cash limits. Click F9:Master to configure the inclusion of any Ledger group for audit under the clause. Click F4: Group to select the required Group (e.g. Unsecured Loans). Select any Group for inclusion by pressing Spacebar. Click Ctrl + A:Change to include the selected Group. Press Ctrl+Q : Quit to return to Loans and Deposits Accepted screen.

  32. Cl. 24(a)- Loans / Deposits Accepted-Sec 269SS Configure the display of details in the report. Click F12:Configure to define the display of details the Loans and Deposits Accepted screen.

  33. Cl. 24(a)- Loans / Deposits Accepted-Sec 269SS Audit transactions of Loans / Deposits Accepted – Sec 269SS. Select required ledger vouchers for audit. Click F9 : Audit to audit. If there are large number of transactions, use the Alt + F12: Range to filter the display of ledger amounts greater than Rs.20000. • Select required value under Audit Status. • Enter value under Amount • Record appropriate remarks under Audit Note • Audit StatusValues are: • Unknown • Accepted by Cash • Accepted by Cheque/DD • Need Clarification • Not a Loan • Under Observation

  34. Printed Annexures to Form 3CD Clause 24(a):Click Alt+P in Loans & Deposits Accepted -u/s 269SS

  35. Cl. 24(b)- Loans / Deposits Repaid-Sec 269T Verify repayments of Loans and Deposits aggregating to and exceeding prescribed cash limits Use the 24(b) – Loans / Deposits Repaid feature to find payments (loans & deposits) made by cash aggregating to and exceeding prescribed limits. Click F9:Master to configure the inclusion of a ledger account under the clause. Click F4:Group to select a Group. Select any Group for inclusion by pressing Spacebar. Click Ctrl + A:Change to include the selected Group. Press Ctrl+Q : Quit to return to Loans and Deposits Repaid screen.

  36. Cl. 24(b)- Loans / Deposits Repaid-Sec 269T Configure the display of details in the report. Click F12:Configure to define the display of details the Loans and Deposits Repaid screen.

  37. Cl. 24(b)- Loans / Deposits Repaid-Sec 269T Audit transactions of Loans / Deposits Repaid – Sec 269T. Select required ledger vouchers for audit. Click F9 : Audit to audit. If there are large number of transactions, use the Alt + F12: Range to filter the display of ledger amounts greater than Rs.20000. • Select status under Audit Status. • Enter value under Amount. • Record appropriate remarks under Audit Note. • Audit StatusValues available are: • Unknown • Need Clarification • Not a Loan • Repaid by Cash • Repaid by Cheque/DD • Under Observation

  38. Printed Annexures to Form 3CD Clause 24(b):Click Alt+P in Loans & Deposits Repaid -u/s 269T Contd…

  39. Cl. 27- Tax Deducted at Source Verify remittance of taxes deducted at source have been made within time to the Government • Use the Tax Deducted at Source feature to find whether tax deducted at source has been remitted within time to the Govt. • Verify details under: • Deduction Details • Payment Details Click Alt+F4:Party to display Party Summary details. Click Alt+F5:NOP to display the Nature of PaymentSummary attracting TDS. Note: NOP-Nature of Payments. To use the Tax Deducted at Source feature, enable the TDS option in Statutory & Taxation under F11:Features in Tally.ERP 9 and account the TDS related transactions. Examine any particular detail (e.g. Deducted on Time) in the TDS Summary screen.

  40. Cl. 27- Tax Deducted at Source Display the TDS expenses closing balance with the closing balances of other expenses (non-TDS). expenses. Compare TDS expenses with non TDS expenses in the TDS Summary screen. Click F5: ExpensesAnalysis to generate the analysis report. Verify non-TDS expenses to see if tax has to be deducted at source for them.

  41. Cl. 27- Tax Deducted at Source Audit transactions of Tax Deducted at Source. Select required ledger vouchers for audit. Click F9 : Audit to audit. Select required status under Audit Status. Record appropriate remarks under Audit Note. • Values for Audit Status available are: • Unknown • Audited • Need Clarification • Under Observation

  42. Printed Annexures to Form 3CD Clause 27: Click Alt+P in TDS Summary Contd…

  43. F11: Audit Features Pre-define rules for performing audits under Sec 44AB (values under Sec 40A(3) can be re-configured by Auditor) The value for inadmissible cash payment under Cl. 17h and the due dates defined for tax and statutory deductions are used in arriving at the exceptions in the tax audit. For e.g., if the payment date for VAT is 15th of the month, then tax paid on or before 15th will show the status as Paid on Time. Payments after 15th will be marked as Paid Late in the report.

  44. Forms 3CD Report Generate the tax audit report in Form 3CD for assessee whose accounts are audited under Sec 44AB for filing with IT Dept. Prepare Form 3CD Audit Report with a provision to export in Excel Gateway of Tally -> Audit & Compliance. Click Form 3CD to generate the audit report. Click Alt + F1: Detailed to view details of the report.

  45. Form 3CD Report The contents of the Form 3CD report are partly entered manually and the permanent information is taken from the master information in Tally.ERP 9 data, created during the Company creation phase.

  46. Forms 3CD Report- short cut buttons Click Alt+T: Select Text. Select standard text for entering in the report. This saves time in report preparation. • Examples of standard text: • Add Text • Remove Text • As per Annexure • Cash System • Mercantile System • NA • Nil • Not Applicable

  47. Forms 3CD Report- short cut buttons Copying of configuration data- Use this feature to copy data configuration from one year to another or current company to another. Click Alt + R: Copy From to perform this operation.

  48. Forms 3CD Report The Form 3CD report after generation

  49. Forms 3CD Report The Form 3CD report after generation

  50. Forms 3CA & 3CB Form 3CA-This report is prepared when the accounts of the business/profession have been audited under any other law. Refer clause (a) of Rule 6G Form 3CB-This report is prepared in the case of a person who carries on business or profession, but not being a person referred to in clause (a) of Rule 6G.

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