Varies by State Legislation

• The frequency of professional tax audits is determined by state-specific PT laws and rules.
  
• There is no uniform national schedule; each state’s Commercial Tax or Municipal Department decides the audit intervals.
  
• Some states conduct audits annually, while others may follow a biennial or risk-based audit model.
  
• Businesses should refer to their local PT authority’s circulars or compliance notifications for clarity.
  
• The audit frequency may also depend on the nature and scale of business operations.
  

Risk-Based and Turnover-Based Selection

• PT departments may audit businesses based on turnover, employee size, tax paid, or compliance history.
  
• MSMEs or low-risk taxpayers may face audits once in several years, especially if returns and payments are consistent.
  
• High-volume employers, defaulters, or late filers may be audited more frequently or randomly selected.
  
• Some states maintain a compliance rating system to identify targets for audit.
  
• Sudden spikes or drops in PT payments may also trigger audit flags.
  

Event-Triggered Audits

• Audits can be triggered outside the regular cycle due to specific events, such as:
  
  • Late payment or non-filing of returns.
    
  • Employee grievances or complaints about improper deduction.
    
  • Mismatch in return data and payment challans.
    
  • Change in registration details such as branch expansion or ownership transition.
    
• These are often surprise or special audits focusing on a specific period or transaction.
  

Notice and Preparation Period

• Departments typically issue an official audit notice specifying:
  
  • Period to be audited (e.g., last 3–5 years).
    
  • List of required documents (e.g., payroll, returns, challans).
    
  • Audit schedule and officer details.
    
• Businesses are usually given a preparation window of 7 to 15 days to organize and submit records.
  
• The audit may be conducted onsite or online, depending on the state’s procedure.
  

Post-Audit Review and Penalty Assessment

• After the audit, a review report is issued highlighting discrepancies, if any.
  
• Businesses are required to rectify errors or pay additional tax, interest, or penalties if demanded.
  
• Clean audits contribute to better compliance ratings and fewer future inspections.
  
• Failing to cooperate with the audit process may lead to legal action or re-audit.