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Tax Audit

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Version: Tax Audit-ILT/1.0/March 2011

Contents

Tax Audit

Introduction.............................................................................................................................................................. 1

Scope and objective of Audit ............................................................................................................................... 1

Tax Audit.............................................................................................................................................................. 2

Tax Audit using Tally.ERP 9 Auditors’ Edition ..................................................................................................... 3

Features of Tally.ERP 9 Auditors’ Edition ............................................................................................................ 3

Features available under Tax Audit in Tally.ERP 9 Auditors’ Edition .................................................................. 4

Button menus in Tax Audit screen ....................................................................................................................... 8

Cl 16 - Bonus, PF, ESI Recoveries

Lesson Objectives ................................................................................................................................................ 11

Provident Fund recoveries deposited in the Fund ............................................................................................. 12

Audit of Monthly PF deductions ......................................................................................................................... 16

Printing of Annexure to Clause 16 ..................................................................................................................... 23

Button menus in Bonus, PF, ESI Recoveries .................................................................................................... 25

Cl 17(h) – Amounts inadmissible u/s 40A(3)


Inadmissible Cash Payments............................................................................................................................. 29

Cash payments that are allowed under Rule 6DD ............................................................................................. 37

Printing of Annexure to Clause 17(h) ................................................................................................................. 40

Button menus in Cash Payments screen ........................................................................................................... 41

Cl18-Payments to Specified Persons


Payments to Specified Persons ......................................................................................................................... 55


Button Menus in Payment to Specified Persons screen .................................................................................... 60

Cl 21- Payments under Section 43B


Value Added Tax ............................................................................................................................................... 63


Button Menus in VAT/CST Payable screen ....................................................................................................... 78

Cl 24 (a) - Loans / Deposits Accepted


Loans / Deposits Accepted ................................................................................................................................ 80

Printing of Annexure to Clause 24(a) ................................................................................................................. 88

Button menus in Loans & Deposits Accepted screen ........................................................................................ 89

Cl 24 (b) Loans / Deposits Repaid


i

Loans / Deposits Repaid .................................................................................................................................... 92

Printing of Annexure to Clause 24(b) ................................................................................................................. 99

Button menus in Loans & Deposits Repaid screen.......................................................................................... 100

Cl 27 Tax Deducted at Source

Lesson Objectives .............................................................................................................................................. 101

Tax Deducted at Source .................................................................................................................................. 102

Printing of Annexure to Clause 27 ................................................................................................................... 116

Button menus in Tax Deducted at Source ....................................................................................................... 116

Client Clarification

Lesson Objectives .............................................................................................................................................. 119

Reports in Tax Audit

Form 3CD ........................................................................................................................................................ 125

Button menus in Form 3CD report ................................................................................................................... 131

Form 3CA......................................................................................................................................................... 132

Form 3CB......................................................................................................................................................... 134

Tax Audit Checklist .......................................................................................................................................... 136

ii

Tax Audit

IntroductionThe term audit generally refers to auditing of financial statements. In an audit, the Auditor provides the expert opinion about the quality of and attests the truth of the statements. Audit also applies to non-financial matters as well, like audit of operations, efficiency, etc.

Simply put, audit means a critical and intelligent examination of facts – financial or otherwise, to provide a certificate or report an attestation, an expert opinion or advice.

As per the Auditing and Assurance Standards on basic principles governing an audit, SA 200 (old AAS 1) published by the Institute of Chartered Accountants of India, an audit is an inde-pendent examination of financial information of any entity, whether profit oriented or not, and irrespective of its size or legal form, when such examination is conducted with a view to express an opinion thereon.

Scope and objective of Audit

The Auditing and Assurance Standard: Objectives and Scope of Audit of Financial Statements, SA 200A (old AAS 2) of The Institute of Chartered Accountants of India, specifies that the main objective of an audit is to express an opinion about truth and fairness of the financial statements.

The audit procedures performed to give the opinion about the financial statements include examination of the financial statements and satisfy about the truth and fairness of the financial position and operating results of the enterprise.

An audit has other objectives which are detection and prevention of errors and frauds.

The scope of audit refers to the identification or delineation of audit related aspects with regard to the objective of audit, procedures, areas to be covered etc. It also relates the auditor’s concern in the underlying accounting records and source documents.

The scope of audit is governed by

the terms of engagement

relevant statutory provisions

relevant Institute pronouncement

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Tax Audit

Tax Audit

Tax Audit was introduced under Sec 44AB of the IT Act, in the Finance Act, 1984. This section is known as the audit of accounts of certain persons carrying on business or profession.

The section states that every person,-

carrying on business shall, if the total sales, turnover or gross receipts as the case maybe, exceeds or exceeded Rs. Forty Lakhs in any previous year; or

carrying on a profession, if the gross receipts exceeds or exceeded Rs. Ten Lakhs in any previous year; or

Any person who claims an income less than the deemed income as computed under Sec 44AD,Sec AE Sec 44AF or Sec 44BB , Sec 44BBB, in any previous year,

shall get the accounts of the previous year audited by an Accountant before the specified date and furnish a report in the prescribed form duly signed, to the Income Tax Dept.

The word “Accountant” means a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949.

The specified date shall mean the 30th of September of the assessment year in relation to the accounts of the previous year.

The audit report under this section (Sec 44AB) is to be furnished or filed in the following formats (Rule 6G of Income Tax Rules):

a person who carries on a business or profession and is required to get the accounts audited under any other law, shall file the report in Form 3CA

a person who carries on a business or profession but is not required to get the accounts audited under any other law, shall file the report in Form 3CB

In addition, furnish all particulars required under the section in Form 3CD

From 1st April 2011, the income limits for the purpose of audit under Sec 44AB, have been revised. Persons carrying on;

Business- Rs.60 lakhs

Profession- Rs.15 lakhs

have to get their accounts audited under the section and furnish the required report.

2

Tax Audit

Tax Audit using Tally.ERP 9 Auditors’ Edition

The Auditors’ Edition of Tally.ERP 9 enables the Auditor to gather audit related information in comparatively lesser time with the accepted level of accuracy to form an audit opinion. From the data available, the audit tool extracts and presents information required to be reported.

It helps in effectively narrowing down to the information to be reported which the Auditor may decide on whether it is to be reported or not.

In this Book, we place emphasis on understanding the audit features and effectively use them to generate information to be reported under the Tax Audit under Section 44AB of the Income Tax Act, 1961.

Features of Tally.ERP 9 Auditors’ Edition

The Tally.ERP 9 Auditors’ Edition comes with these features to equip the Chartered Accountant to audit the accounts of an assessee efficiently and efficiently:

IT Assisted Audit services

Remote Access clients’ data/reports using Tally.ERP 9 Auditors’ Edition

Post corrections and clarifications remotely

Classification of records based on relevant clauses

Facility to record & store Audit Note/Remark for every voucher

Track alterations/modifications to vouchers post audit

Facility to configure blocking of back dated entries

Allow column sorting and multi-selection of vouchers during Audit

Dashboard showing the statistics of Sampled, Audited, Clarifications sought, received and Unaudited vouchers/records

Generate related reports & annexures

Benefits of Tally.ERP 9 Auditors’ Edition

The benefits an Auditor get using the Tally. ERP 9 Auditors’ Edition is:

savings in audit time resulting in increased audit productivity and efficiency

ability to audit transactions online

availability of information to prepare audit working papers

extract financial information required for Tax Audit (under Section 44AB)

increase in additional avenues of billable services

3

Tax Audit

Features available under Tax Audit in Tally.ERP 9 Auditors’ Edition

The Auditors’ Edition of Tally.ERP 9 provides the following clauses for tax audit under Sec 44AB.

Clause 16 – Bonus, PF, ESI Recoveries

Clause 17(h) - Amounts inadmissible u/s 40A (3)

Clause 18 – Payments to Specified Persons

Clause 21 –

Payments under Section 43B

Employer’s Contribution

Tax Collected at Source

Service Tax

Value Added Tax

Clause 24(a) – Loans/ Deposits Accepted

Clause 24(b) – Loans/ Deposits Repaid

Clause 27 – Tax Deducted at Source

All these form annexures to the Form 3 CD report.

In addition, you can generate:

Form 3CA

Form 3CB

Form 3CD

4

Tax Audit

The access to the Tax Audit features in the Tally.ERP 9 is through the Audit & ComplianceMenu.

To reach the menu, you have to select the following steps:

1. Gateway of Tally>Audit & Compliance

The Gateway of Tally screen is displayed.

Figure 1. Audit & Compliance Menu

2. Select Audit & Compliance and press Enter

5

Tax Audit

The Audit & Compliance menu in the Gateway of Tally screen is displayed.

Figure 2. Tax Audit features

The audit features under Tax Audit are displayed in the Audit & Compliance menu.

The features are:

44AB Audit

Form 3CD

Form 3CA

Form 3CB

44AB Audit

This is the main feature of the Tax Audit in the product. The feature provides audit features of clauses that are to be reported in the Form 3CD report.

3. Select 44AB Audit and press Enter to display the Tax Audit Dashboard

6

Tax Audit

The Tax Audit screen is displayed with the required details.

Figure 3. Tax Audit Dash Board Screen

The details displayed in this screen are:

Clause No – The number assigned to the clause for reporting in the Form 3CD report.

Audit Type - The description provided to the clause for audit under the section.

Unaudited - The number of vouchers/transactions found in the accounts relating to the clause.

Under Observation - the number of transactions which are under observation by the Auditor who wants to gather more information before making any decision.

Need Clarification - the number of transactions for which the Auditor has communicated to the client requesting additional information

Clarified (to be re-audited) – the number of transactions for which the client has provided clarifications to the Auditor but have to be audited once again.

Altered (to be re-audited) – the number of transactions that have been altered by the client after the audit.

Audit Complete? - The question whether the audit of the clause is completed.

7

Tax Audit

4. Select the required clause by pressing the Spacebar

The Tax Audit Dash Board screen is displayed.

Figure 4. Save Audit Button

The button menu Alt + F9: Save Audit is enabled in the right button panel.

5. Click Alt+F9: Save Audit.

The Save Tax Audit window in the Tax Audit screen is displayed.

Figure 5. Tax Audit Complete Screen

6. Select Yes/No under Save Tax Audit window in the Tax Audit screen

The selected value appears under Audit Complete ? in Tax Audit screen.

Button menus in Tax Audit screen

F2: Period- Click F2: Period button menu or the function key F2 to display the Assess-ment Year screen. Enter the required year value against Beginning under Financial Year-window. This is useful when the data of two years are maintained in a single folder and you want to load the data of the financial year under audit

8

Tax Audit

The Financial Year window in the Assessment Year screen is displayed..

Figure 6. Period Entry for loading of audit data

Alt+ C: Clarification List - Click Alt + C: Clarification List button menu or click Alt and Ckeys.

The List of Clarifications screen is displayed.

Figure 7. List of Clarifications Screen

The screen provides the details of clarifications sought from the client by the Auditor.

F11: Features-Click F11: Features button menu or function key F11 to configure details relating to Accts, Inv, Stat, Tally.Net and Audit (default Tally.ERP9 feature).

9

Tax Audit

The Tax Audit Rules in the Company Operations Alteration screen is displayed.

Figure 8. Tax Audit Rules - F11:Features

F12: Configure- Click F12: Configure button menu or click function key F12 to define the configuration of details to be displayed.

The Configuration window in the Configuration screen is displayed.

Figure 9. Configuration Screen for Tax Audit Dash Board - F12:Configure

The details under Configuration : Show Last Audit Details - Select Yes/No as value.

10

Cl 16 - Bonus, PF, ESI Recoveries

Lesson ObjectivesOn completion of this lesson, you will be able to:

Extract relevant information required under section 36(1)va

Audit & Record Audit Comments for Clause 16

Print Annexure in prescribed form

The audit of this clause is performed with respect to Sec 36(1) va of the Income Tax Act. This deduction is termed as Other deductions and is allowed in computing the income referred to in Sec 28 (Profits and gains of business or profession).

The sub-clause (va) is regarding any sum received by the person (assessee) from the employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees’ State Insurance Act, 1948, or any other fund set up for the welfare of the employees. Such sum is credited by the assessee to the employee’s account in the relevant fund(s) on or before the due date.

The audit objective under this clause is to find whether the assessee as an employer is depos-iting sums collected from the employees in the funds on or before the due dates as per the respective Acts.

The due date means the date by which the assessee (employer) is required to deposit the credit the employee’s contribution to the employee’s account in the relevant fund under any Act, rule, order or notification issued, or standing order, award, contract of service, etc.

To use this feature your client has to:

Activate the Payroll option under F11: Features in Accounting Features in default Tally.ERP 9 product.

Configure Yes to Maintain Payroll under Cost/Profit Centres Manage-ment.

The Client should account all payroll transactions in the payroll option.

11

Tax Audit

Provident Fund recoveries deposited in the Fund

Figure 9. Clause 16- Bnus, PF, ESI Recoveries

1. Select Bonus, PF, ESI Recoveries in Tax Audit screen and press Enter

12

Tax Audit

The Employees’ Deduction screen is displayed.

Figure 10. Employees’ Dedution Screen

The summary details under Employees’ Deduction Details screen are:

Particulars - The details of the funds to which the sums are credited by the assessee are dis-played. For example, Provident Fund, etc.

Under the Amount column the following details are displayed.

Contributed/Deducted - The amount that is contributed by the employees or deducted from their salaries.

Paid- The amount that is paid/deposited to the funds after the deductions/contribu-tions.

Difference- The amount that is not paid/deposited to the funds.

Payment Status - The current status of the amount/contribution of employees on the payment/deposit to the respective funds. The values can be:

On Time

Due Partially

Under the Audit Status column the following details are displayed (visible by scrolling)

Audited - The number of audited transactions/vouchers

Unaudited - The number of un audited transactions/vouchers

Total - The total of audited and unaudited transactions/vouchers

13

Tax Audit

Configuration of Bonus, PF, ESI Recoveries Screen

You can configure the display of details in the main screen of the Clause 16 feature by clicking F12: Configure button menu or click the function key F12 in the Configuration of Bonus, PF, ESI Recoveries screen.

The Configuration screen is displayed.

Figure 11. F12: Configure Screen with Configuration Details

The details under Configuration are:

Show Provident Fund Details - Enter Yes/No as value.

Show Employee State Insurance Details - Enter Yes/No as value.

Show Professional Tax Details - Enter Yes/No as value.

Show Bonus Details - Enter Yes/No as value.

Show Voucher Audit Details - Enter Yes/No as value.

Verification of Ledger Classification

In order to know the details of group, pay head and statutory pay type, you can click F5: Masters button menu in the Employees’ Deduction screen.

Click F5: Masters to display the List of Pay Heads screen.

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Tax Audit

The List of Pay Heads screen is displayed.

Figure 12. List of Pay Heads Screen

This report gives you the information on the payroll masters for a better understanding.

Payment Summary

If at any point of you want to view the payment summary for the selected deductions or any other deductions, you can click F6: Payment Summary button menu in the List of Pay Heads screen.

On clicking the F6 key, the Payment Summary window in the Select Report screen is dis-played.

Figure 13. Select Report Screen

Select the required statutory deduction under List of Reports for display.

For Example, if you select Provident Fund and press Enter, the report on PF payments/deductions is displayed.

15

Tax Audit

The Details of Provident Fund Payments screen is displayed

Figure 14. Details of Provident Fund Payments Screen

You can select the required month and drill down to view the payments to the Provident Fund.

Similarly you can select other payment, e.g., Bonus and generate the summary report.

Audit of Monthly PF deductions

Let us audit the payment of deductions/contributions to Provident Fund account month-wise.

2. Select Employees’ Statutory Deduction ledger under Provident Fund in the Employ-ees’ Deduction screen and press Enter

16

Tax Audit

The details of the Statutory Pay type under Payroll Monthly Summary screen is dis-played.

Figure 15. Payroll Monthly Summary Screen

The details under Payroll Monthly Summary screen are:

Statutory Pay Head - The name of the statutory deduction appears. In this case it is Provident Fund.

Particulars - The months of the financial year are displayed, i.e. Apr- Mar.

The columns under Amount are:

Contributed/Deducted- The amount deducted under the above pay head type for the month is displayed.

Paid -The actual payment into the fund for the statutory deduction is displayed.

Difference - The difference in amount which can be due/excess paid for the statutory deduc-tions (Contributed/Deducted minus Paid).

Int & Other Payments - The interest amount paid on late payments and any charges paid are displayed.

Payment Status - The status of deposit/payment into the statutory fund is displayed.

17

Tax Audit

The values are:

On Time

Due Partially.

The columns under Audit Status are:

Audited - The number of audited transactions/vouchers

Unaudited - The number of un audited transactions/vouchers

Total - The total of audited and unaudited transactions/vouchers

3. Move the cursor to the Paid column under Amount in the Payroll Summary Screen and press Enter

The Provident Fund Payment Vouchers screen is displayed.

Figure 16. Payroll Montly Summary Screen

The details in this screen are:

Date - The date of the voucher prepared for the statutory deduction in the month under review is displayed.

Vch No. – The number of the voucher prepared for accounting the statutory deduction is dis-played.

Challan Date - The date which is mentioned on the Challan used for remitting the statutory deduction is displayed.

18

Tax Audit

Due Date - The date by which the payment/contribution has to be paid into the Fund as pre-scribed under its Rules.

Payment Status - The actual payment status whether paid on time or delayed is displayed. If paid within the due date, the status value is On Time else the value is Late.

Amount - The deduction amount recorded in the voucher.

Interest Payments - The amount paid as interest for late payments are displayed.

The auditing of the statutory deduction is made by selecting the transactions in the Provident Fund Payment Vouchers screen.

4. Select a transaction in the Provident Fund Payment Vouchers screen and press Space-bar

The F9: Audit button menu is displayed in the right side panel.

Figure 17. Selection of Transaction for Audit

You can select a transaction and press Enter to audit. If you want to select all transactions for audit, click Ctrl+Spacebar.

19

Tax Audit

5. Click F9: Audit or click the function key F9

The Audit Details window in the Audit Details screen is displayed.

Figure 18. Audit Details Screen

Audit Status - The status selected by the Auditor on completion of the audit is displayed. There are six types of status values:

Unknown -The Auditor is yet to complete the audit and status is unknown

Disallowed - The transaction has not met the audit criteria and is therefore disallowed

Late Paid - The amount of contribution/deduction is deposited into the Fund after the due date stipulated under the Rules of the Fund

Need Clarification - The Auditor has not decided on the status of the audit and needs additional information from the client before completion

Paid on Time - The amount of contribution/deduction is deposited into the Fund on or before the due date as stipulated under the Rules of the Fund

Under Observation - The audit of the transaction is not complete as the auditor needs to consult/check additional evidence/information

Audit Note - The remarks recorded/entered on the transaction by the Auditor on completing the audit.

20

Tax Audit

6. Select the required status from Audit Status window


7. Type the required remarks under Audit Note

8. Accept the details by pressing Enter

9. Click Ctrl + A to accept the audit details in the Provident Fund Payment Vouchersscreen

The Provident Fund Payment Vouchers screen after the audit of the transaction is dis-played.

Figure 20. Provident Fund Payment Vouchers after Audit

You can similarly audit other vouchers in the screen in a similar manner.

To view the entries in the payroll transaction during the audit, select the transaction and press Ctrl + Enter in the Provident Fund Payment Vouchers screen.

21

Tax Audit

The Accounting Voucher Alteration (Secondary) screen is displayed.

Figure 21. PF Payment Voucher with Details

You can now verify the entry for the statutory deduction with supports like payroll docs and payment challan.

When you come to the Tax Audit Dash board screen, you will find there is a number mentioned under the Audited column.

22

Tax Audit

The Tax Audit Dash Board screen after the audit is displayed.

Figure 22. Tax Audit Dash Board after the Audit

Printing of Annexure to Clause 16

After completion of the audit under Cl. 16, you can print its annexure.

10.Click Alt + P: Print in the Employees Deductions screen and press Enter

23

Tax Audit

The Printing window in the Print Report screen is displayed.

Figure 23. Print Report Screen

11.Click Yes to Print ?

The Annexure to Clause 16 & 21 report for Provident Fund payments is displayed.

Figure 24. Annexure to Clause 16 - Provident Fund Payments

24

Tax Audit

Button menus in Bonus, PF, ESI Recoveries

F5: Masters - Click F5: Masters button menu or click F5 function key to display the List of Pay Heads screen (already discussed above).

F6: Payment Summary - Click F6: Payment Summary button menu or click F6 function key to view other details of other statutory deductions (already discussed above).

Alt + X: Exceptions/All - Click Alt + X: Exceptions button menu or click Alt and X keys together to display only the exceptions.

The Employees’ Deductions screen is displayed.

Figure 25. Employees Deduction Report- Exceptions

To display the default details of the report, click Alt + X: All button menu in the above screen.

F11: Features - Click F11: Features button menu or function key F11 to configure details relating to Accts, Inv, Stat, Tally.Net and Audit (default Tally.ERP9 feature).

25

Tax Audit

The Company Operations Alterations (F11: Features) screen with the details of the Tax Audit Rules is displayed.

Figure 26. F11: Features- Tax Audit Rules

The due dates for Provident Fund (PF), Employee State Insurance (ESI) and Professional Tax (PT) are displayed under Payroll in the above menu.

F12: Configure - Click F12: Configure button menu or click function key F12 to define the configuration of details to be displayed (already discussed above).

26

Cl 17(h) – Amounts inadmissible u/s 40A(3)

Lesson ObjectivesOn completion of this lesson, you will be able:

To extract relevant information required under section 40A(3)

Audit & Record Audit Comments for Clause 17(h)

Print Annexure in prescribed form

The audit of this clause is performed with respect to Sec 40A (3) of the Income Tax Act. Sec 40A deals with expenses or payments not deductible in certain circumstances. The subsection 3 states that if an assess incurs an expenditure in respect which a payment or aggregate of payments are made to a person in a day in a mode other than an account payee cheque or a crossed demand draft, exceeds rupees twenty thousand, no deduction is allowed in respect of such expenditure in arriving at the taxable income.

If any allowance is made in the assessment for any year in respect of a liability and the assessee makes payments in respect of the liability by a mode other than an account payee cheque or crossed demand draft, such payment(s) so made will be deemed to be the profits and gains of the business or profession and accordingly will be charged to income tax.

The audit objective under this clause is to find whether the assessee has made any pay-ment(s) in respect of an expenditure/liability equal to or aggregating to twenty thousand and more in a day will be disallowed and charged to the taxable income.

Configuring the cash limit/aggregate on payments

Before the audit is commenced the limit on cash payments(aggregate) has to be defined.

You can define the value for aggregate cash payments on a day in F11: Features under Tax Audit Rules by selecting the F5: Audit feature.

27

Tax Audit

The Company Operations Alterations (F11: Features) screen is displayed.

Figure 27. F11: Features- Values for Inadmissible Cash Payments

The inadmissible value under Sec 40A (3) is configured under Inadmissible Cash Payments U/s 40A (3).

Accept the value for the inadmissible cash payments in the Company Operations Altera-tion screen.

28

Tax Audit

Inadmissible Cash Payments

The Tax Audit screen is displayed.

Figure 28. Amounts Inadmissible u/s 40A(3)

1. Select Amounts inadmissible u/s 40A (3) in Tax Audit screen and press Enter

29

Tax Audit

The Cash Payments screen is displayed.

Figure 29. Cash Payments above Rs.20K Screen

The header details in the screen are:

Group - The details of the accounting group is displayed. The Primary groups are displayed by default.

Aggregate Cash Payments exceeding - The cash limit allowable for making a cash payments on a day.

Minimum Voucher Amount - The minimum amount accounted in the voucher on a day.

The columnar details in the screen are:

Particulars - The ledger accounts which contain cash payment transactions.

Cash Payments - The total of the cash payments for the ledgers displayed.

The columns under Voucher Value are:

Lowest -The lowest cash transaction amount recorded

Highest - The highest cash transaction amount recorded

Unaudited Vouchers - The number of vouchers which remain unaudited

30

Tax Audit

Configuration of Cash Payments Screen

You can configure the display of details in the Cash Payments screen of the Clause 16 feature by clicking F12: Configure button menu or clicking the function key F12.


Figure 30. F12:Configure - Cash Payments Screen


Show Group Details - Enter Yes/No as value.

Show Voucher High/Low Values - Enter Yes/No as value.

Show Average Cash Payments Exceeding - Enter the required value above which the transactions are displayed in the report.

Ignore Vouchers having Amount less than - Enter the required value below which the transactions are not displayed.

Show Voucher Audit Details - Enter Yes/No as value to display audit details for transac-tions audited.

Sorting Method - The methods available are:

Alphabetical (Decreasing)

Alphabetical (Increasing)

Amount-wise (Decreasing)

Amount-wise (Increasing)

Default

2. Select any transaction (e.g. Shankar) in the Cash Payments screen and press Enter

31

Tax Audit

The Cash Payments screen after selection of a ledger account is displayed.

Figure 31. Selection of Ledger for Audit

The Ledger Vouchers screen for the selected transaction is displayed.

Figure 32. Ledger Voucher Screen

3. Select any payment transaction (e.g. Vch No. 396 for Rs.21000)by pressing the Space-bar

32

Tax Audit

The Ledger Vouchers screen after selection of a voucher is displayed.

Figure 33. Selection of Voucher for Audit

The F9: Audit button menu is displayed in the right side panel.

4. Click F9: Audit or click F9 function key

The Audit Details screen is displayed.

Figure 34. Audit Details Screen for Cash Payments Above Rs.20K


i. You can select a transaction and press Enter to audit.

ii. If you want to select all transactions for audit, click Ctrl + Spacebar.

33

Tax Audit

The values for the Audit Status are:

Unknown -The Auditor is yet to complete the audit and status is unknown

Allowed - The transaction has met the audit criteria and is therefore valid and allowed


Need Clarification -The Auditor has not decided on the status of the audit and needs additional information from the client before completion


The Audit Details screen with the details under Audit Status, Amount and Audit Note is displayed.

Figure 35. Audit Details Screen with remarks

6. Select required status value under Audit Status

7. Type the transaction value under Amount



34

Tax Audit

The Ledger Vouchers screen after the audit is displayed.

Figure 36. Ledger Voucher Screen after Audit

You can similarly audit other transactions of the voucher in the screen in a similar manner.

10.Click Ctrl + A: Accept in the status bar to accept the audit remarks

To view the entries in the voucher transaction during the audit, select the transaction and click Ctrl + Enter in the Ledger Vouchers screen.

35

Tax Audit


Figure 37. Voucher Alteration Screen

You can now verify the entry for the cash payment with supports like Vouchers and other doc-uments.

When you come to the Tax Audit Dash board screen, you will find there is a number mentioned under the Audited column.

36

Tax Audit


Figure 38. Tax Audit Dash Board Screen after audit of Cl.17h

Cash payments that are allowed under Rule 6DD

The Income Tax Act disallows cash payments totalling and aggregating to Rs. 20000/- unless they are made by Account Payee Cheque or Account Payee Demand Draft. It also allows cash payments in certain cases and circumstances under clauses (a) to (h) of Rule 6DD as deduc-tions.

Some examples exempted under Rule 6DD are salaries paid to employees, payments made on bank holidays or strike, payments made to Government against Statutory dues, Payments made to RBI, SBI or subsidiary bank, LIC, UTI etc.

Tally.ERP AE provides the flexibility to exclude ledgers which fall under any clause under Rule 6DD. To exclude expenses which are allowed, follow the steps given below:

Click Ctrl + F9: Master button menu Cash Payments screen or click the keys Ctrl and F9together to configure the exclusion of the ledgers from the section 40 A (3).

37

Tax Audit

The Select Ledger screen is displayed.

Figure 39. Select Ledger Screen

Select any ledger (i.e. Advance Tax) and press Enter.

38

Tax Audit

The Ledger Alteration screen for the selected ledger account is displayed.

Figure 40. Ledger Alteration Screen to exclude ledgers under Rule 6DD

Make appropriate selections under Skip Audit for the selected ledger account under:

Name of Audit Class

Applicable From

Applicable To

Accept the selections.

39

Tax Audit

The Cash Payments screen after the exclusion is displayed.

Figure 41. Cash Payments Screen after Configuration under Rule 6DD

Printing of Annexure to Clause 17(h)

After completion of the audit under Cl. 17(h), you can print its annexure.

11.Click Alt + P: Print in the Cash Payments screen and press Enter

The Annexure to Clause 17(h) report is printed.

Figure 42. Annexure to Clause 17h

40

Tax Audit

Button menus in Cash Payments screen

F4: Group - Click F4: Group button menu or click F4 function key to display the ledgers for any selected group.

The Select Item screen is displayed.

Figure 43. Select Item Screen

Select any group (e.g. Administrative Expenses) and press Enter.

41

Tax Audit

The Cash Payments screen for the selected group is displayed.

Figure 44. Cash Payment Screen for a Group

F7: Show All Vch/F7 - Show Pending - Click F7: Show All Vch or click F7 function key to display the voucher details under Audit Status and vice versa.

42

Tax Audit

The Cash Payments with the details under Audit Status is displayed.

Figure 45. Display of Audited Vouchers (F7) Screen

The columns displayed under Audit Status are:

Audited - The number of audited transactions/vouchers.

Unaudited - The number of unaudited transactions/vouchers.

Total - The total of audited and unaudited transactions/vouchers.

Click F7: Show Pending to display the default details.

F8: Show Audit Amt/F8: Hide Audit Amt - This button menu is activated on clicking the clicking the F7: Show All Vch button menu.

43

Tax Audit

The Cash Payments screen after clicking F8 is displayed.

Figure 46. Display of Audit Amount in Cash Payments Screen (F8)

The extra information displayed is the columns under Amount in addition to the usual details.

The columns under Amount are:

Unaudited - This is the value of the cash payments to be audited.

Allowed - This is the value of the cash payments that are allowed as per the Income Tax Act & Rules.

Disallowed -This is the value of the cash payments that are disallowed as per the Income Tax Act & Rules. This value is Unaudited minus Allowed amounts.

Click F8: Hide Audit Amt to hide the audited amount details.

F9: Show Skipped - Click F9: Show Skipped/F9: Hide Skipped to display the details of ledgers whose cash payments are allowable as per law, i.e. they are ‘skipped’. For example Advance Tax payment which can be paid by cash.

44

Tax Audit

The Cash Payments screen with details of skipped ledgers is displayed.

Figure 47. Details of Skipped Ledgers (F9)

The details of ledgers skipped are displayed under Skipped Ledgers.

Click F9: Hide Skipped to display the default details.

F10: Range Wise - Click F10: Range Wise button menu or click F10 function key to display the cash payments for a configured range of amounts.

The Cash Payments screen with range of amounts are displayed.

Figure 48. Cash Payment - Voucher Amount Range - (F10)

The payment values are displayed under Lowest and Highest for different payment ranges

If you want to redefine the amount range for display when using F10: Range Wise button menu, click F6: Amount wise button menu.

45

Tax Audit

The Cash Payment Range screen is displayed.

Figure 49. Definition of Cash Payment Range

You can redefine the range as required in this screen and save the new definitions.

Alt + B: Bank Summary - Click Alt + B: Bank Summary button menuor click Alt and Bkeys together to display the payments made through the bank accounts.

The Bank Payments screen is displayed.

Figure 50. Bank Payments Screen

Select the required bank ledger (e.g. Canara Bank) and press Enter.

46

Tax Audit

The Ledger Payment Vouchers screen is displayed.

Figure 51. Bank Payment Details

You can now verify if any of the payments was made by a bearer cheque in consultation with the client.

Select any payment by pressing the Spacebar.

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Tax Audit

Figure 52. Mark/Unmarking Payment as Bearer Cheque

Click Ctrl + A : Mark/Unmark button menu to mark Yes/No under Is Bearer Cheque?

F11: Features - Click F11: Features button menu or function key F11 to configure details relating to Accts, Inv, Stat, Tally.Net and Audit (default Tally.ERP9 feature- already discussed above).

F12: Configure - Click F12: Configure button menu or click function key F12 to define the details of cash payments to be displayed (already discussed above).

You can click Ctrl + Space (Spacebar) to select all transactions for marking Yes/No.

48

Cl18-Payments to Specified Persons

Lesson ObjectivesOn completion of this lesson, you will be able:

To extract information required under Payments to Specified Persons


Print Annexure as per Sec. 40(2) (b)

The payments to specified persons are governed under Sec 40(2) (b) of the Income Tax Act. As per this sub-section, if an assessee incurs any expenditure for which payment has been made or is to be made to any person and the Assessing Office (ITO) is of the opinion that such expenditure is unreasonable or excessive having regard to the:

fair market value of goods, services or any facilities received

or

legitimate needs of the assessee’s business

or

benefit derived /accrued to the assessee

In all such circumstances, the expenditure considered excessive or unreasonable shall not be allowed as a deduction while computing the taxable income of the assessee.

The definitions of persons referred above are the following:

The definition also includes:

Any individual who has a substantial interest in the business or profession of the asses-see, or any relative of such individual

A Company/Firm/AOP/HUF having a substantial interest in the business or profession of the assessee or any director, partner, member of the company, firm or AOP/HUF, or any relative of the such director, partner or member

Type of Assessee Definition of Person

Individual Any relative of the assessee

Company, Firm, AOP or HUF

Any Director of the Company/Partner of the Firm/member of the AOP or HUF or any relative of the above persons

49

Tax Audit

Any assessee being an individual carrying on a business or profession(including the rel-ative of the assessee) having a substantial interest in the business or profession of that person

Any assessee being a company, firm or AOP/HUF or any director of the company, part-ner of the firm, member of the AOP/HUF or any relative of such director, partner, mem-ber, has a substantial interest in the business or profession of that person

The audit objective under this clause is to find whether the assessee has incurred any expenditure which is excessive and unreasonable in relation to the value of goods/services, legitimate needs or benefit to the assessee’s business or profession.

Configuration of ledger accounts as specified persons

Before the audit of such payments is performed you have to configure the ledger accounts as specified persons. The configuration is done in consultation with the Client.

For example, if you want to configure a ledger account (e.g. AVT Computers) as a specified party.

The process of configuring the ledger account as a specified person is described here.

The Tax Audit Dash Board screen is displayed here to describe the process.

Figure 53. Payments to Specified Person Feature in Tax Audit Screen

1. Select Payments to Specified Persons in Tax Audit screen and press Enter

50

Tax Audit

The Payments to Specified Persons screen is displayed.

Figure 54. Payments to Specified Persons Screen

2. Click Ctrl + F9:Master in the Payments to Specified Persons screen

51

Tax Audit


Figure 55. Select Item Screen to select Group for Configuration of Specified Person

3. Select the required Group (e.g. Sundry Debtors) under which the ledger account is cre-ated.

If there are ledger accounts configured as Specified Persons, they are dis-played in the Payment to Specified Persons screen. In such circum-stances, click Ctrl + F9: Master in the right side button menu panel in the Payments to Specified Persons screen for configuring additional ledgers as specified persons.

52

Tax Audit

The Related Party Configuration screen is displayed.

Figure 56. Related Party Configuration Screen

4. Select any ledger account (e.g. AVT Computers) by pressing the Spacebar

The F9: Update button menu is now enabled in the right side button panel.

5. Click F9: Update

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Tax Audit



6. Select Yes against Is Related Party

7. Type the appropriate value (e.g. Sister Concern) against Relation Type

8. Accept the selection and entry.

The Related Party Configuration screen after the update is displayed.

Figure 58. Related Party Configuration Screen after Configuration

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Tax Audit

Payments to Specified Persons

Having configured the ledger accounts, the process of auditing the transactions with specified persons is described here.

The Payments to Specified Persons screen after configuration is displayed.

Figure 59. Payments to Specified Persons Screen after Configuration

You will find the ledger account (AVT Computers) configured as Specified Person is displayed in the above screen.

The details displayed in the above screen are:

Group -The details of all ledgers under all groups are displayed in the report. By default it isAll Items.

Particulars -The ledgers which are configured as specified parties are displayed under the groups.

Total Amount - The total value of the transactions accounted under the ledger accounts is displayed.

Unaudited Vouchers -The total number of vouchers which are to be audited is displayed.

Configuration of details in the Payments to Specified Persons Screen

You can configure the display of details in the Payments to Specified Persons screen of the Clause 18 feature by clicking F12: Configure button menu or click function key F12.

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Tax Audit


Figure 60. F12:Configure- Configuration Screen for Payments to Specified Persons



Show Relation Type - Enter Yes/No as value.

Show Voucher Audit Details - Enter Yes/No as value to display audit details for transac-tions audited.






Default

9. Select AVT Computers in the Payments to Specified Persons screen and press Enter

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Tax Audit

The Ledger Vouchers screen is displayed.

Figure 61. Ledger Vouchers Screen

10.Select the payment transaction by pressing the Spacebar

11.Click Alt + F1: Detailed to display the details of the voucher

The F9: Audit button menu is now enabled.

12.Click F9:Audit

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Tax Audit


Figure 62. Audit Details Screen with Audit Status details

The values available under Audit Status are:

Unknown - The Auditor is yet to complete the audit and status is unknown

Need Clarification - The Auditor has not decided on the status of the audit and needs addi-tional information from the client before completion

Not to be Reported - The transaction has met the audit criteria and is therefore valid and not be reported as payment to specified party

To be Reported - The transaction has not met the audit criteria and has to be reported in the audit report as payment to specified party


Figure 63. Audit Details Screen with details

13.Select required status value under Audit Status

The value of the transaction is automatically displayed under Amount

14.Type the required details under Nature of Payment

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Tax Audit

15.Type the required remarks under Audit Note

16.Accept all details by pressing Enter

17.Return to the Ledger Vouchers screen

18.Click Ctrl + A: Accept to accept the audit remarks

19.Return to the Payments to Specified Persons screen

20.Click F7: Show All Vch in the Payments to Specified Persons screen

The Payments to Specified Persons screen is displayed with details under Audit Status(refer value under Audited column).

Figure 64. Payments to Specified Persons with Audited Details

The Tax Audit screen after the audit is displayed.

Figure 65. Tax Audit Dash Board Screen with Details

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Tax Audit



21.Click Alt + P: Print in the Payments to Specified Persons screen and press Enter

The Annexure to Clause 18 report is printed.

Figure 66. Annexure to Clause 18

Button Menus in Payment to Specified Persons screen

F4: Group - Click F4 - Group button menu or click F4 function key to display the ledgers for any selected group (already discussed above).

F7: Show All Vch/F7 - Show Pending -Click F7: Show All Vch or click F7 function key to display the voucher details under Audit Status and vice versa(already discussed above).

Ctrl + F9: Master - Click Ctrl + F9: Master button menu or click Ctrl and F9 together to configure the ledgers as specified parties (already discussed above).

F11: Features -Click F11: Features button menu or click function key F11 to configure details relating to Accts, Inv, Stat, Tally.Net and Audit (default Tally.ERP9 feature).


60

Cl 21- Payments under Section 43B


Extract information in respect of Payments made under Sec. 43B


Print Annexures in Prescribed form

The section deals with the taxes, cesses, duties or fees collected or employer’s share of statutory deductions (PF or Superannuation Fund), etc. The subsection mentions that deduc-tions on account of the above sums are allowed only in computing the income referred to in Sec 28 of that previous year in which they are actually paid by the assessee.

The deductions are allowable provided the assessee payments are remitted to the concerned Funds/Depts before the date of filing the tax return.

The details of deductions under the above section are:

Any sum payable by the assessee as tax, duty, cess or fee, by whatever name called, under any law for time being in force

or

any sum payable by the assessee as an employer by way of contributions to any Provi-dent Fund/Superannuation Fund/Gratuity Fund or any other employee welfare fund

any sum paid by the assessee to an employee as Bonus or commission for services ren-dered, where such sum would have not been payable as profits/dividends (Sec 36(1) (ii))

any sum payable as interest on any loan/borrowing from a public financial institution or a State Financial Corporation/State Industrial Investment Corporation in accordance with the terms and conditions of loan agreement

any sum payable as interest on any loan or advances from a scheduled bank in accord-ance with the terms and conditions of the loan agreement

any sum payable by the assessee as an employee in place (in lieu) of any leave at the credit of the employee

The audit objective under this clause is to find whether the assessee has paid the sums described above before the date of filing of the tax return.

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Tax Audit

The Statutory & Taxation screen under F11: Features is displayed.

Figure 67. Stautory & Taxation Features in F11: Features

To audit the transactions under Payments Under Section 43B, you have to activate the following in the default Tally.ERP 9 product and account the required transactions:

Enable Tax Collected at Source (TCS) option by setting it to Yes in Statutory & Taxation (F3: Statutory) under F11: Features

Enable Service Tax option by setting it to Yes in Statutory & Taxation (F3: Statutory) under F11: Features

Enable Value Added Tax (VAT) option by setting it to Yes in Statutory & Taxation (F3: Statutory) under F11: Features

Enable Payroll Statutory option by setting it to Yes in Statutory & Taxation (F3: Statutory) under F11: Features

Maintain Payroll option by setting it to Yes in Accounting Features (F1: Accounts) under F11: Features

62

Tax Audit

The Company Operations Alteration screen with the Accounting Features features (F11: Features) is displayed.

Figure 68. Accounting Features under F11: Features

Value Added Tax

The process of auditing the transactions under Value Added Tax (VAT) is described.


Figure 69. Tax Audit Dash Board Screen with Value Added Tax Feature

63

Tax Audit

1. Select the required feature (e.g. Value Added Tax) in the Tax Audit screen and press Enter

The VAT/CST Payable Summary screen is displayed.

Figure 70. VAT/CST Payable Summary Screen

The details in the screen are:

Particulars -The details are:

Output Tax (A)- The tax collected on sales of items

Available Input Tax Credit (B) – The tax credit/paid on purchase of items

Tax Payable after adjusting the available (A-B)-The balance tax payable after deducting the input credit against output tax payable

Paid - The situation when the input tax credit is more than the output tax

Tax Amount - The tax amounts on both sales and purchases are displayed.



Unaudited - The number of un audited transactions/vouchers.


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Tax Audit

VAT/CST Payments Output Summary

The VAT/CST Payments Output Summary report displays the various rates of Output VAT available on the sale of goods and the assessable value on which the tax was collected.

2. Select any of the tax components in VAT/CST Payable Summary for audit (e.g. Output Tax (A) and press Enter

The VAT / CST Payments Output Summary screen is displayed.

Figure 71. VAT/CST Output Payments Summary Screen

3. Select any component of Output VAT (e.g. Output VAT @ 12.5%) in the VAT / CST Pay-ments Output Summary screen and press Enter

65

Tax Audit


Figure 72. Ledger Vouchers Screen - Output VAT @ 12.5%

The above report displays details of:

Voucher Type

Voucher No

Assessable Value

Tax Amount

The other details to be entered during audit are:

Audit Status

Audit Remarks

Audit Note

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Tax Audit

Configuration of display of details in Ledger Vouchers screen

You can configure the display of details in the Ledger Vouchers screen of the Clause 21 feature by clicking F12: Configure button menu or click function key F12.


Figure 73. Configuration Screen- F12: Configure


Show Narrations also - Enter Yes/No as value.

Show Audit Status - Enter Yes/No as value.

Show Audit Note - Enter Yes/No as value.

Show Client’s Clarifications - Enter Yes/No as value.

Show Vouchers of Audit Status - Enter any of these values.

Any

Unknown

Altered

Audited

Clarified

Need Clarification

Unaudited

Under Observation



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Tax Audit




Default

4. Select any ledger account (e.g. Janata Timbers) in the Ledger Vouchers screen and press Enter (or by press the Spacebar and click F9: Audit)





Audited - The Auditor has completed the audit of the transaction



Figure 75. Audit Details Screen with remarks

5. Select the required status value under Audit Status

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Tax Audit




Figure 76. Ledger Vouchers Screen after Audit

8. Click Ctrl + Enter to view the details of the sales entry

69

Tax Audit


Figure 77. Voucher Alteration Screen

You can now verify the sales entry with supports like party invoice, sales order and other docs. In similar manner you can audit other sales transactions relating to Output Tax and Output Tax Credit.

When you come to the Tax Audit Dash board screen, you will find there is a number mentioned under the Under Observation column.

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Tax Audit


Figure 78. Tax Audit Dash Board Screen after Audit

Available Tax Input Credit

9. Click Value Added Tax feature under Cl.21- Payments Under Section 43B and press Enter

The VAT/ CST Payable Summary screen is displayed.

Figure 79. VAT/CST Payable Summary Screen

10.Click Available Input Tax Credit (B) in the VAT/CST Payable Summary screen and press Enter

71

Tax Audit

The VAT/ CST Payments Input Summary screen is displayed.

Figure 80. VAT / CST Payments Input Summary Screen

The VAT/ CST Payments Input Summary report displays the Input Tax Credit available and the assessable value on which tax was paid for purchase of goods at different tax rates.

It also displays the excess input credit which is brought forward from the previous year.

11.Select any component of Input VAT (e.g. Input VAT @ 12.5%) in the VAT / CST Pay-ments Output Summary screen and press Enter



The above report displays details of:

Voucher Type

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Tax Audit

Voucher No

Assessable Value

Tax Amount

The other details to be entered during audit are:

Audit Status

Audit Remarks

Audit Note

Configuration of display of details in Ledger Vouchers screen

You can configure the display of details in the Ledger Vouchers screen of the Clause 21 feature by clicking F12: Configure button menu or click function key F12.


Figure 82. Configuration for Ledger Vouchers Screen- F12: Configure


Show Narrations also - Enter Yes/No as value.




Show Vouchers of Audit Status - Enter any of these values.

Any

Unknown

Altered

73

Tax Audit

Audited

Clarified

Need Clarification

Unaudited

Under Observation






Default

12.Select any ledger account (e.g. HP India Ltd) in the Ledger Vouchers screen and press Enter (or by pressing the Spacebar)







74

Tax Audit


Figure 84. Audit Detail Screen with Remarks

13.Select the required status value under Audit Status


15.Accept the details by pressing Enter



16.Click Ctrl + Enter to view the details of the sales entry

75

Tax Audit


Figure 86. Accounting Voucher Alteration Screen

You can now verify the purchase entry with supports like party invoice, purchase order and other docs. In similar manner you can audit other purchase transactions relating to Input Tax and Input Tax Credit.

17.Click Ctrl + A and return to the VAT / CST Payments Output Summary screen

When you come to the Tax Audit Dash board screen, you will find there is a number mentioned under the Need Clarification column.

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Tax Audit





18.Click Alt + P: Print in the VAT/CST Payable screen and press Enter

The Annexure to Clause 21 report is printed.

Figure 88. Annexure to Clause 21

77

Tax Audit

Button Menus in VAT/CST Payable screen


The Company Operation Alteration screen displays the Tax Audit Rules.

Figure 89. Tax Audit Rules - F11: Features

The due dates for remitting tax dues are mentioned here:

VAT & CAT: Under Value Added & Central Sales Tax

Service Tax: Under Service Tax

F12: Configure - Click F12: Configure button menu or click function key F12 to define the configuration of details to be displayed.


Figure 90. Configuration for VAT/ CST Payable Summary Screen- F12: Configure



78

Cl 24 (a) - Loans / Deposits Accepted


Extract information required under Loans / Deposits Accepted

Audit & Record Audit Comments for Clause 24(a)

Print Annexure as per Sec. 269 SS

Under Sec 269 SS of the Income Tax Act, the mode of taking or accepting certain loans and deposits are defined. This section states that no person after 30th June 1984 shall take or accept from any other person (person giving the sum is referred as the Depositor) any loan or deposit otherwise than by an account payee cheque or account payee demand draft if,-

a. the amount of the loan/deposit or the aggregate of the loan and deposit

or

b. on the date of accepting/taking the loan/deposit if there is any loan or deposit taken or accepted earlier by the person from the depositor remaining unpaid ( whether due or not) , the aggregate of such unpaid loan/deposit

or

c. the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b),

is twenty thousand rupees or more.

However there are exceptions to this section.

The provisions of this section shall not apply to any loan or deposit taken or accepted from, or a loan or deposit taken by:

Government

Banking Company, Post Office Savings Bank or Co-operative Bank

A Corporation established by a Central, State or Provincial Act

Any Government Company as defined u/s 617 of the Companies Act, 1956

Institutions, Associations, Bodies or Class of Institutions, Associations or Bodies which the Central Government may, with reasons in writing, notify in the Official Gazette

The provisions of the section shall not apply to any loan or deposit transaction is between the persons who have agricultural income and neither have any income chargeable to Income Tax.

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Tax Audit

The audit objective of this clause is to find those payments of loan or deposit accepted by mode other than crossed account payee cheque or demand draft and its value is and aggre-gates to twenty thousand rupees or more.

Consideration of ledger accounts for loans/deposits accepted

You can configure ledgers under a sub group (e.g. South Debtors under Sundry Debtors) to be considered for Loans & Deposits Accepted feature by using the Ctrl + F9: Masterbutton menu.

Loans / Deposits Accepted



1. Click Loans/ Deposits Accepted in the Tax Audit screen and press Enter

By default, this feature displays all ledgers created under Unsecured/Secured Loan Groups. However, the button menu, Ctrl + F9: Master is pro-vided in the screen to configure any ledger that comes under the Sundry Creditors/Debtors groups. This button menu will enable you as an Auditor to check for transaction(s) that has/have been recorded wrongly/intentionally under sundry debtor/creditor ledger accounts.

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Tax Audit

The Loans & Deposits Accepted screen is displayed.

Figure 92. Loans & Deposits Accepted Screen

The details in the Loans & Deposits Accepted screen are:

Group - The ledger details under the groups displayed in the report. By default it is All Items.

Particulars - The ledgers which are configured to be considered under loans & deposits accepted are displayed.


Unaudited Vouchers - The total number of vouchers which are to be audited is displayed.

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Tax Audit

Configuration of details in Loans & Deposits Accepted screen

You can configure the display of details in the Loans & Deposits Accepted screen of the Clause 21 feature by clicking F12: Configure button menu or by clicking the function key F12.


Figure 93. Configuration of details in Loans/Deposits Accepted Screen- F12: Configure



Eliminate all cross Sales transactions - Enter Yes/No as value.







Default

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Tax Audit

Audit of transaction of Loans & Deposits Accepted

Figure 94. Loans & Deposits Accepted Screen- Ledger Selection

2. Select any ledger account (e.g. Maruthu Finance Ltd) in the Loans & Deposits Accepted screen and press Enter

83

Tax Audit


Figure 95. Voucher Selection for Audit

3. Select the cash transaction (Receipt) by pressing the Spacebar for audit

The button menu, F9: Audit is now enabled in the right side panel menu bar. You can also press the Enter key to perform the audit of the transaction.


84

Tax Audit





Accepted by Cash - The loan or deposit has been accepted by cash and the value is Rs.20000 or more

Accepted by Cheque / DD - The loan or deposit has been accepted by a crossed cheque /DD


Not a Loan - The transaction recorded is not a loan or deposit





85

Tax Audit

The Audit Details screen with the details is displayed.

Figure 97. Audit Details Screen with Remarks




9. Press Ctrl + A to return to the Loans & Deposits Accepted screen

10.Click F7: Show All Vch to display the Audit Status in the Loans & Deposits Acceptedscreen

86

Tax Audit

The Loans & Deposits Accepted screen after the audit is displayed.

Figure 99. Loans & Deposits Accepted Screen after Audit


Figure 100. Tax Audit Dash Board Screen after the Audit

87

Tax Audit

Printing of Annexure to Clause 24(a)

After completion of the audit under Cl. 24 (a), you can print its annexure.

11.Click Alt + P: Print in the Loans & Deposits Accepted screen and press Enter

The Annexure to Clause 24(a) report is printed.

Figure 101. Annexure to Clause 24(a)

88

Tax Audit

Button menus in Loans & Deposits Accepted screen

F4: Group - Click F4: Group button menu or click F4 function key to display the ledgers for any selected group.


Figure 102. Selection of Group through F4: Group

Select Unsecured Loans under List of Groupings and press Enter.

89

Tax Audit

The Loans & Deposits Accepted screen containing the ledger details under Unsecured Loans is displayed.

Figure 103. Ledgers under Selected Group- Unsecured Loans

You can audit the ledger transactions of the selected group.

F7: Show All Vch/F7: Show Pending - Click F7: Show All Vch or click F7 function key to display the voucher details under Audit Status and vice versa (already discussed above).

Ctrl + F9: Master - Click Ctrl + F9: Master button menu or Ctrl and F9 keys together to configure the ledgers to be considered for loans and deposits received feature (already discussed above).



90

Cl 24 (b) Loans / Deposits Repaid


Extract information required under Loans / Deposits Repaid

Audit & Record Audit Comments for Clause 24(b)

Print Annexure as per Sec. 269T

This section is called as Mode of repayment of certain loans or deposits and is covered by the provisions of Sec 269 T of the Income Tax Act. The section requires that a branch of a banking company or a co-operative bank or a company or co-operative society or firm or any person shall repay a loan or deposit made with it by the mode of an account payee cheque or account payee bank draft in the name of the person who has made the loan or deposit. This mode has to be made only if:

the amount of loan or deposit together with the interest, if any payable

or

the aggregate amount of the loans or deposits held by a person with a bank branch or a co-operative bank or a company or co-operative society or a firm or a with a person either singly or jointly on the date of repayment along with the interest , if any, payable

is twenty thousand rupees or more.

In the case of a bank branch or a co-operative bank, the repayment may be in the form of crediting the proceeds to the savings/current account maintained with bank branch/co-operative bank of the person who has made the loan or deposit.

The section however does not apply to repayment of loans or deposits by persons to:

Government

Any bank company, post office savings bank or co-operative bank

A Corporation established under a Central, State or Provincial Act

A Government Company as defined under Sec 617 of the Companies Act, 1956

Institutions, association or body or class of institutions, associations or bodies which the Central Government may, for reasons recorded in writing, notify in this behalf in the Official Gazette

The banking company means a company to which the Banking Regulation Act, 1949 applies and includes a bank or banking institution as defined under section 51 of the Act.

The co-operative bank means a bank defined under Part V of the Banking Regulation Act, 1949.

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The loan or deposit means any loan or deposit of money repayable after notice or repayable after a period. In the case of a person other than a company it includes loan or deposit of any nature.

Consideration of ledger accounts for loans/deposits repaid

You can configure ledgers under a sub group (e.g. South Debtors under Sundry Debtors) to be considered for Loans & Deposits Repaid feature by using the Ctrl + F9: Masterbutton menu.

Loans / Deposits Repaid


Figure 104. Tax Audit Dash Board Screen- Loans & Deposits Repaid

1. Select Loans / Deposits Repaid in the Tax Audit screen and press Enter

By default, this feature displays all ledgers created under Unsecured/Secured Loan Groups. However, the button menu, Ctrl + F9: Master is pro-vided in the screen to configure any ledger that comes under the Sundry Creditors/Debtors groups. This button menu will enable you as an Auditor to check for transaction(s) that has/have been recorded wrongly/intentionally under sundry debtor/creditor ledger accounts.

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Tax Audit

The Loans & Deposits Repaid screen is displayed.

Figure 105. Loans & Deposits Repaid Screen

The details in the Loans & Deposits Repaid screen are:

Group - The ledger details under the groups displayed in the report. By default it is All Items.

Particulars - The ledgers which are configured to be considered under Loans & Deposits Repaid are displayed.


Unaudited Vouchers - The total number of vouchers which are to be audited is displayed.

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Configuration of details in Loans & Deposits Repaid screen

You can configure the display of details in the Loans & Deposits Repaid screen of the Clause 21 feature by clicking F12: Configure button menu or by clicking the function key F12.


Figure 106. Configuration for Loans & Deposits Repaid Screen- F12: Configure



Eliminate all cross Purchase transactions - Enter Yes/No as value.







Default

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Tax Audit

Audit of transaction of Loans & Deposits Repaid.

Figure 107. Loans & Deposits Screeen- Selection of Ledger Account

2. Select any ledger account (e.g. B Ramesh - Loan) in Loans & Deposits Repaid screen and press Enter



3. Select any transaction (e.g. Payment) by pressing the Spacebar for audit

The button menu, F9: Audit is now enabled in the right side panel menu bar. You can also press the Enter key to perform the audit of the transaction.


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Not a Loan - The transaction recorded is not a loan or deposit

Repaid by Cash - The loan or deposit has been repaid by cash and the value is Rs.20000 or more

Repaid by Cheque / DD - The loan or deposit has been repaid by a crossed cheque /DD





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Tax Audit

The Audit Details screen with the details is displayed.





9. Click Ctrl + A to accept the entries/selection under Audit Details

10.Click F7: Show All Vch to display the details under Audit Status

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Tax Audit

The Loans and Deposits Repaid screen is displayed with details under Audit Status (refer value under Audited column).

Figure 112. Loans & Deposits Repaid Screen after Audit

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Tax Audit


Figure 113. Tax Audit Dash Board after Audit

Printing of Annexure to Clause 24(b)

After completion of the audit under Cl. 24 (b), you can print its annexure.

11.Click Alt + P: Print in the Loans & Deposits Repaid screen and press Enter

The Annexure to Clause 24(b) report is enclosed.

Figure 114. Annexure to Clause 24(b)

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Tax Audit

Button menus in Loans & Deposits Repaid screen

F4: Group - Click F4: Group button menu or click F4 function key to display the ledgers for any selected group (Similar to what was discussed under Loans & Deposits Accepted feature).

F7: Show All Vch/F7: Show Pending - Click F7: Show All Vch or click F7 function key to display the voucher details under Audit Status and vice versa (already discussed above).

Ctrl + F9: Master - Click Ctrl + F9: Master button menu or Ctrl and F9 together to configure the ledgers to be considered for loans and deposits paid feature (already discussed above).

F11: Features - Click F11: Features button menu or function key F11 to configure details relating to Accts, Inv, Stat, Tally.Net and Audit (default Tally.ERP9 feature-already discussed above).


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Cl 27 Tax Deducted at Source


Audit TDS transactions as required under Tax Audit

Generate Annexure to Cl 27

The requirement under this clause refers to the compliance made by the assessee with Chapter XVII-B regarding tax deducted at source and its payment to the credit of the Central Government. If the assessee has not complied with the provisions, the Tax Auditor has to provide details with respect to:

Tax deductible but not deducted

Shortfall on lesser deduction of tax than required

Tax which was deducted late

Tax deducted but not remitted to the Central Government

In this connection reference is made to Sec 200 of the Income Tax Act. This section deals with the duty of the person responsible for deducting the tax at source. The section mentions:

1. Any person deducting tax in accordance with the provisions of this Chapter shall pay within the prescribed time, the tax deducted to the credit of the Central Government or as the Board directs.

2. Any person being an employer, referred to in sub-section (1A) of section 192 shall pay, within the prescribed time, the tax to the credit of the Central Government or as the Board directs.

3. Any person deducting any tax on or after the 1st day of April, 2005 in accordance with the provisions of this Chapter or any person being an employer referred to in sub-section (1A) of section 192 shall, after paying the tax deducted to the Central Government within the pre-scribed time, prepare such statements for such period as may be prescribed. The statements have to be delivered to the prescribed income-tax authority or the authorised person. The statement should in a prescribed form and verified providing required particulars and within such time as may be.

To audit the TDS deduction and payment details, you have to activate the Enable Tax Deducted at Source (TDS) option in the default Tally.ERP 9 product by setting it to Yes in Statutory & Taxation (F3:Statutory) under F11: Features and account the TDS related transactions.

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Tax Audit

The F11: Features screen with the details of Tax Audit Rules is displayed.

Figure 114. Tax Audit Rules for TDS- F11: Features

The due dates in respect of Tax Deducted at Source & Tax Collected at Source are con-figured in this menu.

Tax Deducted at Source


Figure 115. Tax Audit Dash Board Screen- Tax Deducted at Source

1. Select Tax Deducted at Source in the Tax Audit screen and press Enter

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Tax Audit

The TDS Summary screen is displayed.

Figure 116. TDS Summary Screen

The details in the TDS Summary screen are:

Particulars - The report is made of two headings:

Deduction Details - The elements under this sub heading are:

Deducted on Time

Deductible

Deducted Late

Deducted at Zero Rate (Section 197A)

Deducted at Lower Rate (Section 197)

Under Exemption Limit

Marked as Not Applicable

Payment Details - The elements under this sub heading are:

Paid on Time

Paid Late

Deducted but not Paid

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Tax Audit

Assessable Value - The total value of the income assessable for tax is displayed.

Tax Amount - The amount of tax payable on the assessed income as per the rules of Income Tax.



Unaudited - The number of un audited transactions/vouchers.


Note: The report also displays the estimated amount of tax that is payable to the Central Government against Deductible under Deduction Details.

Deduction Details

2. Select any deduction type (e.g. Deduction On Time) under Deduction Details in the TDS Summary screen and press Enter

The TDS Summary screen is displayed.


3. Select any ledger account (e.g. Advertising Expenses) in the TDS Summary screen and press Enter

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Tax Audit

The TDS Bills screen is displayed.

Figure 118. TDS Bills Screen for selected Ledger

Configuration of details in TDS Bills screen

You can configure the display of details in the TDS Bills screen of the Clause 27 feature by clicking F12: Configure button menu or by clicking the function key F12.


Figure 119. Configuration of TDS Bills Screen - F12: Configure





Show Payment Details - Enter Yes/No as value.

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Tax Audit

Show Tax Break-Up - Enter Yes/No as value.

Show Narration - Enter Yes/No as value.

Show Vouchers of Audit Status - The status values available are:

Any

Unknown

Altered

Audited

Clarified

Disallowed

Needs Clarification

Not to be Reported

Unaudited

Under Observation

4. Click Alt + F1: Detailed in the TDS Bills screen to display details for the payments

The TDS Bills screen is displayed with the details.

Figure 120. TDS Bills Screen with Expanded Details

5. Select any party ledger (e.g. Phoneix Agencies) and press the Spacebar

The F9: Audit button menu is activated on the right side panel bar.


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Tax Audit


The TDS Bills screen after the audit of the transaction is displayed.

Figure 123. TDS Bills Screen after Audit

10.Select the audited transaction (e.g. Phoneix Agencies) and press Ctrl + Enter

11.Click Ctrl + A to accept the audit details

The TDS Summary screen after the audit is displayed.

Figure 124. TDS Summary Screen after Audit

During the audit if you want to verify the TDS payment entry, click Ctrl + Enter to display the payment entry voucher. You can now verify the payment entry with supporting documents.

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Payment Details

The TDS Summary screen with Payment Details is displayed.

Figure 126. TDS SUmmary Screen - Payment Details

12.Select any deduction type (e.g. Paid On Time) under Payment Details in the TDS Sum-mary screen and press Enter

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Tax Audit

The TDS Summary Screen is displayed.


13.Select the ledger account (e.g. Advertisement Expenses) in TDS Summary and press Enter

The TDS Bills screen is displayed for the selected ledger.

Figure 128. TDS Bill Screen

Configuration of details in TDS Bills screen

You can configure the display of details in the TDS Bills screen of the Clause 27 feature by clicking F12: Configure button menu or clicking the function key F12.

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Figure 129. Configuration of TDS Bills Screen- F12: Configure


Show Challan Details - Enter Yes/No as value.




Show Deduction Details - Enter Yes/No as value.

Show Payment Details - Enter Yes/No as value.

Show Narration - Enter Yes/No as value.

Show Vouchers of Audit Status - The status values available are:

Any

Unknown

Altered

Audited

Clarified

Disallowed

Needs Clarification

Not to be Reported

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Tax Audit

Unaudited

Under Observation

14.Click Alt + F1: Detailed to display the details of TDS Bills

15.Select the entry (Purc/1-1 ABC & Co) by pressing the Spacebar in the TDS Bills screen

The F9: Audit button menu is activated in the right side button bar.

Figure 130. TDS Bills Screen with Details for Audit

16.Click F9: Audit or click F9 function key








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Figure 132. Audit Details with Remarks

17.Select the required status from Audit Status window


19.Accept the details by pressing Enter

The TDS Bills screen after the audit of the transaction is displayed.

Figure 133. TDS Bills Screen after Audit

During the audit if you want to verify the details of the TDS payment, click Ctrl+ Enter to display the payment voucher. You can now verify the payment entry details with supporting documents.

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20.Click Ctrl + A to accept the audit details

The TDS Summary screen after the audit is displayed.

Figure 134. TDS Summary Screen after Audit

You can also generate the deduction details as per party in the above TDS Summary screen.

21.Click Alt + F4: Party button menu in the TDS Summary screen or click the Alt and F4keys together

The TDS Summary- Deducted on Time - Party Summary screen is displayed.

Figure 135. Deduction Deduction Party Wise Screen

Similarly, you can generate the deduction details as per as per nature of expenses(NOP)

22.Click Alt + F5: NOP button menu in the TDS Summary screen or click the Alt and F5keys together

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Tax Audit

The TDS Summary- Deducted on Time - Nature of Payment screen is displayed.

Figure 136. Deduction Details Nature of Payment Screen



To revert to the Expenses Summary screen from the Party Summary and Nature of Payment Summary screens, click Alt + F6: Expenses button menu.

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23.Click Alt + P: Print in the TDS Deduction & Payment Summary screen and press Enter

The Annexure to Clause 27 (b) (i) report is printed.

Figure 138. Annexure to Cl. 27

In the above report the delayed TDS payments in respect to the payments for advertisement services are displayed.

Button menus in Tax Deducted at Source

F5: Expense Analysis - Click F5: Expense Analysis button menu or click F5 function key to display the Expense Analysis screen.

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Tax Audit

The Expenses Analysis screen is displayed.

Figure 139. Expense Analysis Report- TDS vs Non-TDS Expenses

This report shows the comparison between the TDS and the non-TDS expenses.

Click Alt + F1: Detailed/Condensed to display the expanded report and the default report respectively.

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Tax Audit

The Expenses Summary report with details is displayed.

Figure 140. Expense Analysis Report - Detailed


F12: Configure - Click F12: Configure button menu or click function key F12 to define the configuration of details to be displayed in the TDS Summary screen.


Figure 141. Configuration Screen for TDS Summary Screen- F12: Configure

Select Yes/No against Show Last Audit Details under Configuration.

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Client Clarification


Know how the client clarifies to the Auditor

Audit transcations modified by the Client

As the Auditor you would have requesterd the client for clarifications on the observations found during the audit. This Chapter focuses how the client clarifies your audit query and modification of the audited transactions.

The client executes the following steps in the default Tally.ERP 9 product.

1. Open Tally.ERP 9

The Gateway of Tally screen is displayed.

Figure 152. Gateway of Tally Screen

2. Select Display in Gateway of Tally screen and press Enter

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The Display Menu consisting of various options is displayed.

Figure 153. Display Menu Screen

3. Select Statements of Accounts and press Enter

The Statements of Accounts menu is displayed.

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Tax Audit

Figure 154. Statement of Accounts Menu

4. Select TaXAudit Info in the Statement of Accounts screen and press Enter

The Tax Audit Information screen is displayed.

Figure 155. Tax Audit Information Screen

The columns in the Tax Audit Information screen are:

Clause No.:The number of the clause in the Tax Audit Dash Board screen

Audit Type:The description of the tax audit clause

Need Clarification:The number of the clarifications sought by the Auditor

5. Select Value Added Tax under Payments under Sec43B and press Enter

The Audit Vouchers screen is displayed.

Figure 156. Audit Vouchers Screen

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Tax Audit

Figure 157. Selection of Tax Audit Transaction

6. Select the Input VAT @ 12.5% by pressing the Spacebar

The F9: Clarify button menu is enabled on the right side button panel.

Click F9:Clarify

The Audit Clarification screen is displayed.

Figure 158. Audit Clarification Screen

7. Type the required remarks under Audit Clarification

8. Accept the remarks

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The Audit Vouchers screen after the audit is displayed.

Figure 159. Audit Vouchers Screen after Audit

9. Click Ctrl + A in the Audit Vouchers screen and return to the Tax Audit Information screen

The Tax Audit Information screen after audit is displayed.

Figure 160. Tax Audit Information Screen after Audit

At the Auditor’s end the clarification provided by the Client is shown in the Tax Audit Dash Board screen.

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10.Place the cursor on the voucher under Clarified (To be re-audited) and press Enter

The Ledger Vouchers screen for the transaction is displayed.

Figure 162. Ledger Vouchers Screen after Client Clarification

You can now audit the clarified voucher and mention the appropriate audit remark.

Altered- To be re-audited

If your Client makes any alteration in any audited voucher, the details are displayed under the Altered- To be re-audited column.

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Reports in Tax Audit

The Tally.ERP 9 Auditors’ Edition offers the following reports:

Form 3CD

Form 3CA

Form 3CB

Form 3CD

The assessees whose books of accounts are audited under Sec44AB have to furnish a statement of particulars in Form 3CD to the Income Tax Department. Currently some details of clauses (e.g. 1-6) are automatically populated by the master data in the product. Other details have to be entered manually for generating the report. However the annexures to the clauses discussed above are generated as mentioned above.

The Form has user-friendly options to copy the content of the report from one financial year to another thus saving time and energy. They can also be copied from one company to another. Apart from these advantages, you can select standard texts for quick entry of details in the report.

1. Select Form 3CD in the Gateway of Tally screen under Audit & Compliance and press Enter

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Tax Audit

The Form 3CD screen is displayed.

Figure 140. Form 3CD Report

2. Select any clause (e.g. 7 (a & b) - Particulars of Members / Partners in the Form 3CD screen and press Enter

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Tax Audit

The Particulars of Members / Partners screen is displayed.

Figure 141. Particulars of Members / Partners Screen

You can use standard texts available to enter against the clauses or enter your own text.

3. Click Alt + T: Select Text in the status bar below


Figure 142. Select Item with Select Text WIndow

4. Select the required text under Select Text window and press Enter

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Tax Audit

The selected value is displayed against the clauses.

Figure 143. Particular of Members Screen with Selected Details

5. Accept the selection

You can similarly fill the details for other clauses if required.

You want to copy the common data from one financial year to another.

6. Click Ctrl + O :Copy From button menu or click Ctrl and O keys together in the Form 3CD screen

The Data Configuration screen is displayed.

Figure 144. Data Configuration Screeen

7. Select the required financial year from the Financial Year window against Copy FromFinancial Year and press Enter

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Figure 145. Selection of Year for Copying

8. Accept the selection

In the similar manner you can copy the details to another company.

9. Click Alt + P: Print to print the Form 3CD report

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Tax Audit

The Form NO. 3CD report is displayed.

Figure 146. Form 3CD Report

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Tax Audit

Button menus in Form 3CD report

Alt + F1: Detailed - Click Alt + F1: Detailed button menu or click Alt and F1 keys together to display a detailed report of the form. Click Alt + F1: Condensed to display the default report.

The Form 3CD report in a detailed form is displayed.

The Form 3CD report in a detailed form is displayed.

Figure 147. Detailed Form 3CD Report

F2: Period - Click F2: Period button menu or click F2 key to display the Form 3CD report for the required year.


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Form 3CA

This is an report that has to be furnished by an Auditor who performs the statutory audit of the assessee’s business or profession as required under any other law (other than the audit under Sec44AB). The Auditor has to file the audited copies of final statements of profit & loss account, the balance sheet and annexures, to the IT Department in addition to the report under Form 3CD report.

1. Select Form 3CA in the Gateway of Tally screen under Audit & Compliance and press Enter

The Print Report screen is displayed.

Figure 148. Form 3CA Print Screen

2. Click Yes under Print

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The Form NO. 3CA audit report is displayed.

Figure 149. Form 3CA Report

The report can be printed with the signature of the Auditor.

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Form 3CB

This is another audit report under Sec 44AB which applies to a person who carries on business or profession, but not being a person referred to in clause 1 (a) of Rule 6G.

Note: Clause1 (a) of Rule 6G states:

(1) The report of audit of the accounts of a person required to be furnished under section 44AB shall,—

a. in the case of a person who carries on business or profession and who is required by or under any other law to get his accounts audited, be in Form No. 3CA;

The Auditor provides this information in the report:

Certification of profit & loss a/c and the balance sheet

Statement of particulars under Sec 44AB are furnished in Form 3CD

Certifies the particulars provided in Form 3CD and the annexures as true and correct

Further certifies the necessary information and explanations provided by the assessee

Maintenance of proper books of accounts in the head office and the branches of the assessee

Certifies that the profit & loss a/c and balance sheet along with accounting notes give a true and fair view of the accounting information

1. Select Form 3CB in the Gateway of Tally screen under Audit & Compliance and press Enter

The Print Report screen is displayed.

Figure 150. Form 3CA - Print Report Screen

2. Click Yes under Print

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Tax Audit

The Form NO. 3CB audit report is displayed.

Figure 151. Form 3CA Report

The report can be printed with the signature of the Auditor.

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Tax Audit

Tax Audit Checklist:

As an Auditor performing the Tax Audit, you have to ensure the minimum requirements for the conducting an efficient and complete audit.

To ensure the audit is conducted efficiently, ensure you get the updated/latest data

Plan the audit and the extent of scrutiny based on the nature and operation of business

Collect details relating to the assessee on:

Partners/Directors

Branch/Division

Related Party

Maintenance of Books of Accounts

Methods of Accounting

Valuation of closing stock

Quantitative details of stock traded

Admissible expenses

Amounts debited to P&L A/c

Particulars of Loans & Deposits accepted and repaid

Accounting ratios

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