tally.erp 9 auditors’ edition tax audit (sec 44ab of it act)

© Tally Solutions Pvt. Ltd. All Rights Reserved

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

© Tally Solutions Pvt. Ltd. All Rights Reserved 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


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


Definition & Audit ObjectiveAudit of certain persons under Sec 44AB of the Income Tax Actwhose 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 annumProfessionals : Gross receipts above Rs.10 lakhs per annum

(Note: The limits have been increased to Rs.60 lakhs for businessesand Rs.15 lakhs for professionals from FY 2011-12)

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


Audit & Compliance MenuTally 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 theaudit features.


Access to Audit & Compliance MenuWhen 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 fieldsAccept and save the entries.


Access to Audit & Compliance MenuWhen the Auditor provides the access details – Scenario2

Click Audit & Compliance in Gateway of Tally screen todisplay Company Alteration- Enable Security screen.

Enable access to use audit features by entering:•Name of Administrator•Password

Accept and save the login details for access.


Tax Audit Menu

The Audit & Compliance Menu with the available features.

Tally Main -> Gateway of Tally->Audit & Compliance

The menus under Tax Audit are: •44AB Audit•Form 3CD•Form 3CA•Form 3CB


Tax Audit DashboardGateway 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

□ Audit Status

□ 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


Cl. 16- Payment of Statutory DuesVerify employee contributions towards statutory funds (PF,ESI,etc), employee bonus and commission payments.

Use the Bonus, PF ,ESI Recoveries featureto verify remittanceof statutory dues in timeto Government

To perform the audit under this clause, the Payroll option in F11:Featuresin Tally.ERP 9 has to be enabled and the payroll transactions have to be accounted


Cl. 16- Payment of Statutory DuesVerify 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


Cl. 16- Payment of Statutory DuesVerify 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.


Cl. 16- Payment of Statutory DuesKnow 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.


Cl. 16- Payment of Statutory DuesConfigure 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


Cl. 16- Payment of Statutory DuesAudit transactions easily.

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.

In the Audit Details screen:

•Select required status under Audit Status•Enter remarks under Audit Note.

Values for Audit Status are:

•Unknown•Disallowed•Late Paid•Need Clarification•Paid on Time•Under Observation


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


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 PaymentsU/s 40A (3) is defined.Define new value if required.


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.


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 andthe 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.


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.


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


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

Click F9:Audit to audit Transactions.

In the Audit Details screen:

•Select required status under Audit Status

•Enter the appropriate value under Amount

•Enter remarks under Audit Note.

Select the required Ledger Account’s cash payment for audit.

Values available for Audit Status are:

•Unknown•Allowed•Disallowed•Need Clarification•Under Observation


Printed Annexures to Form 3CDClause 17(h):Click Alt+P in Amounts Inadmissible under u/s 40A(3):

Contd…


Cl. 18- Payments to Specified PersonsVerify and disallow expenses/payments made to specified persons if found to be excessive/unreasonable

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.

Configure the ledger accounts in Related Party Configuration screen as per discussions with the Client.

Click F9:Update to configure.

The Payments to Specified Persons details display after related party configuration.-Sec 40A (2) (b)

You can alternatively configure the ledger accounts as Specified Persons through ledger creation under Masters menu.

Configure the display details through F12: Configure.-Sec 40A (2) (b)

Configure the display details under Other Information in Ledger Alteration screen.

Click F12: Configure.Select Yes against Use Other Information for Ledger Accounts.


Cl. 18- Payments to Specified Persons

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.

Auditing Payments to Specified Persons.Values are available for Audit Status.•Unknown•Need Clarification•Not to be Reported•To be Reported•Under Observation


Printed Annexures to Form 3CDClause 18 :Click Alt+P in Payments to Specified Persons u/s 40A(2)(b)

Contd…


Cl. 21- Payments Under Section 43BVerify 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

Use PaymentsUnder Section 43B feature to audit timely remittance of statutory dues to various Funds/Govt.

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


Cl. 21- Payments Under Section 43BVerify 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 > TCS Payable Summary > TCS Monthly Summary > TCS Payment Vouchers to view the timely payment of TCS for theselected month.

Execute the steps: Tally MAIN > Gateway of Tally > Audit & Compliance > Tax Audit > Service Tax Payable Summary > Service Tax Monthly Summary > Service Tax Payment Vouchers to view the timely payment of Service Tax for theselected 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.


Cl. 21- Payments Under Section 43BAudit of payments of statutory levies (e.g.TCS)under Sec 43B.




Record appropriate remarks under Audit Note

Values for Audit Status available are:

•Unknown•Audited•Need Clarification•Under Observation


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

Contd…


Cl. 24(a)- Loans / Deposits Accepted-Sec 269SSVerify 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.

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.

Click F4: Group to select the required Group (e.g. Unsecured Loans).


Cl. 24(a)- Loans / Deposits Accepted-Sec 269SSConfigure the display of details in the report.

Click F12:Configure to define the display of details the Loans and Deposits Accepted screen.


Cl. 24(a)- Loans / Deposits Accepted-Sec 269SSAudit transactions of Loans / Deposits Accepted – Sec 269SS.



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 NoteAudit Status Values are:•Unknown•Accepted by Cash•Accepted by Cheque/DD•Need Clarification•Not a Loan•Under Observation


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


Cl. 24(b)- Loans / Deposits Repaid-Sec 269TVerify 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.

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.

Click F4:Group to select a Group.


Cl. 24(b)- Loans / Deposits Repaid-Sec 269TConfigure the display of details in the report.

Click F12:Configure to define the display of details the Loans and Deposits Repaid screen.


Cl. 24(b)- Loans / Deposits Repaid-Sec 269TAudit transactions of Loans / Deposits Repaid – Sec 269T.



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 Status Values available are:•Unknown•Need Clarification•Not a Loan•Repaid by Cash•Repaid by Cheque/DD•Under Observation


Printed Annexures to Form 3CD

Contd…

Clause 24(b): Click Alt+P in Loans & Deposits Repaid -u/s 269T


Cl. 27- Tax Deducted at SourceVerify remittance of taxes deducted at source have been made withintime 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

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.

Click Alt+F4:Party to display Party Summary details.

Click Alt+F5:NOP to display the Nature of Payment Summary attracting TDS.

Note:NOP-Nature of Payments.


Cl. 27- Tax Deducted at SourceDisplay 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: Expenses Analysis to generate the analysis report.

Verify non-TDS expenses to see if tax has to be deducted at source for them.


Cl. 27- Tax Deducted at Source




Record appropriate remarks under Audit Note.

Audit transactions of Tax Deducted at Source.

Values for Audit Status available are:

•Unknown•Audited•Need Clarification•Under Observation


Printed Annexures to Form 3CDClause 27: Click Alt+P in TDS Summary

Contd…


F11: Audit FeaturesPre-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.


Forms 3CD ReportGenerate 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.


Form 3CD ReportThe 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.


Forms 3CD Report- short cut buttonsClick 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


Forms 3CD Report- short cut buttonsCopying 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.


Forms 3CD ReportThe Form 3CD report after generation


Forms 3CA & 3CBForm 3CA-This report is prepared whenthe accounts of thebusiness/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.


Thank You

tally.erp 9 auditors’ edition tax audit (sec 44ab of it act)

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