What is a tax audit and what are the types of tax audits?

A tax audit is a review or examination of an individual’s or organization’s accounts and financial information to ensure compliance with tax laws and regulations. There are two main types of tax audits in India: (1) Regular Assessment and (2) Special Audit. Regular Assessment is a routine verification of tax returns, while a Special Audit under Section 142(2A) is ordered by the tax authorities in specific cases where the accounts are too complex or there are reasons to believe income has been understated. Both types of audits aim to detect tax evasion and ensure proper reporting.