Format of engagement letter for ITR filing

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Format of Engagement letter for filing income tax return

Engagement letter format for income tax return filing

In my previous article, I emphasized the significance of obtaining an engagement letter for any professional work. It serves as a crucial document that outlines the terms and conditions of the engagement between the service provider and the client. 

With tax season upon us, securing a signed engagement letter from your clients is crucial. This document establishes a clear understanding of the services you'll provide for their tax return preparation. In this post, I have included a draft format of an engagement letter for ITR filing. You can refer to this template to ensure that all the necessary elements are included in your engagement letter. Remember to review and modify it according to your specific requirements.

Draft format of engagement letter for filing income tax return:

To,
Mr. Mayur ,

Thank you for choosing our firm, [Consultant's Name], to assist you with your income tax returns. This letter confirms the terms of our engagement and outlines the nature and extent of the services I will provide. Please review the following information regarding our engagement:

Scope of Services:

I will prepare your income tax return in accordance with the provisions of the Income Tax Act, 1961, and rules made thereunder. Preparation of the income tax return does not constitute an audit engagement or involve the expression of an opinion on the accuracy of the financial or non-financial data presented in the return. My role will be limited to assisting you in the preparation and filing of your income tax return based on the information provided. I may ask you to clarify certain items but will not audit or otherwise independently verify the authenticity of data you submit.

Information Required:

To ensure the accuracy and completeness of your tax return, I will rely on you to provide all necessary information and supporting documentation. While I may provide a checklist to help you collect the required data, it is your responsibility to provide timely, accurate and complete information.

Confidentiality:

I value the confidentiality of the information you share with me, and I am committed to upholding professional standards to safeguard it. However, please be aware that in the event of any legal proceeding against you, if government agencies such as ED/SEBI/CBI require access to your financial information and summon me to provide it, I may be obliged to comply with the laws of the land.

Penalties and Interpretation of Tax Law:

The law imposes penalties for underestimating tax liability. If you wish to know more about penalties, please contact me for further guidance. In situations where tax laws are unclear or there are potential conflicts in interpretation, I will provide you with various reasonable courses of action, along with the risks and consequences associated with each option. The final decision on the alternative to adopt will be made by you.

Fees and Payment Terms:

My fee for preparing your tax return will be based on the complexity of the return, and I will provide a quote in advance of my work. If complications arise during the preparation process, I may need to adjust the fee. Invoices are due and payable upon presentation, and an interest charge may be added to accounts not paid within thirty (30) days, as permitted by applicable laws.

Record Retention:

I will return your original records to you at the end of our engagement. It is essential that you securely store these records, along with supporting documents, as they may be required to prove the accuracy and completeness of your tax return if demanded by the Income tax authority. As per my firms policy and applicable laws I will also electronically/physically retain copies of your records and work papers for seven years, after which they will be destroyed.

Tax Scrutiny and Additional Expenses:

If your tax return is selected for audit/scrutiny by the tax authorities, I am available to represent you or prepare materials in response to correspondence. Please note that such representation and additional services are not included in my tax preparation fees and will be invoiced separately for the time and expenses incurred.

Liabilities and Termination:

My maximum liability to you arising for any reason relating to services rendered under this letter shall be limited to the amount of fees you paid for these services.

Either party may terminate this engagement by providing written notice to the other party. In the event of termination, you will be responsible for payment of fees for services rendered up to the date of termination.

Dispute Resolution :

In the event of any dispute or disagreement arising out of or relating to this engagement, the parties agree to first attempt to resolve the matter through good-faith negotiations. If the dispute cannot be resolved amicably within a reasonable period, the dispute may then be brought before a court of competent jurisdiction.

Any disputes or claims arising from this engagement shall be subject to the exclusive jurisdiction of the courts in [jurisdiction] and shall be governed by the Indian laws. (for NRI ITR)

Both parties agree to participate in mediation or alternative dispute resolution methods, if recommended by the court or mutually agreed upon, before resorting to litigation.

The prevailing party in any legal proceedings shall be entitled to recover reasonable costs incurred in connection with the dispute.

Acceptance and applicability:

To confirm your understanding of the terms outlined above, please sign the enclosed copy of this letter and return it to me. Your signature indicates your agreement to the terms of our engagement. Thank you for your confidence in our firm. If you have any further questions, please feel free to contact me.

This engagement letter applies to the current tax year and can also apply to future years unless terminated or amended in writing.

Yours sincerely,

------------------
(Name & Sign of Consultant)



Acceptance:
Please sign below to indicate your acceptance of the engagement letter:


____________________
(Name & Sign of client)

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Keep in mind do not forget to take engagement letter before filing income tax return

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