Some of the audits are totally random, with nothing the individual taxpayer did to generate many audits are actually instigated by the taxpayers themselves. An audit is simply the Income Tax Department (IT-Department) double-checking your numbers to make sure you don’t have any discrepancies on your return. If you’re telling the truth, and the whole truth, you needn’t worry.
IT-Department conducts audits to minimize the tax gap or the difference between what the IT-Department is owed and what it has actually received. It usually selects taxpayers based on suspicious activity.
3 Ways to Avoid the Tax Audit
1. Maintaining Good Records- By developing the habit of keeping and maintaining primary and secondary records all year-round. And using a personalized filing system to keep the records close to the right tax return. In this way, preparing for a tax audit can be tackled in a smart way. Primary records like bills and receipts. While secondary records could be anything like spreadsheets and any other sort of summary info that might be important. Documentation mismatch must be double-checked to get a better tax position.
2. Reporting Income Earned- Tax audit can be mind-boggling and complicated. By, providing the complete information about the earnings, expenses, and deductions with accurate documents and keeping everything in a neat and simple format for the auditor to have a look at so that the taxpayer will not bear the burden of proving that the information provided is incorrect.
3. Knowing the Benefits of Filing Income Tax Return- The most important benefit of paying taxes and filing the income tax return is that only the income disclosed by you in your income tax return is considered your true income. If you are required to show your income at any place in the future, only the amount disclosed on your income tax return would be considered as a valid proof of your income. Moreover, even if you apply for any Loan from a Bank, you are mandatorily required to show them your income tax return and only the income disclosed in this income tax returnwould be considered as a valid source of income.
It is highly advisable for all income-earning individuals to file their income tax returns before the due date which will reduce the chances of being audited for tax.