Every person carrying on business and maintaining books of account is required to get them audited from a Chartered Accountant if total sales, turnover or gross receipt from business during the previous year exceeds Rs. 1 crore.
To reduce compliance burden on small and medium enterprises, Section 44AB is proposed to be amended to increase the threshold limit, for a person carrying on business, from Rs. 1 crore to Rs. 5 crore.
However, the increased threshold limit of Rs. 5 crore shall be applicable only when cash receipt and payment made during the year does not exceed 5% of total receipt or payment, as the case may be.
In other words, more than 95% of the business transactions should be done through banking channels.
The applicability of tax audit provisions from Assessment Year 2020-21 can be understood with the help of following table:
| Nature of Business or Profession | Category of Taxpayer | When audit is Mandatory? |
| Any Professions (Specified or Non-specified) | Any | If Gross Receipts from Profession during the relevant previous year exceeds Rs.50 lakhs |
| Business | Bothe Payment and Receipt in case does not exceed 5% of the Total Receipts and Payments respectively. | If total Sales, Turnover or Gross Receipts from Business during the previous year exceeds Rs. 5 Crore. |
| Either payment or receipt in cash exceeds 5% of the total receipts and payment respectively | If total sales, turnover or gross receipt from business during the previous year exceeds Rs. 1 crore | |
| Business eligible for Presumptive Tax Scheme under Section 44AD | Resident Individual or HUF | If income of assessee exceeds the maximum exemption limit and he has opted for the scheme in any of the last 5 previous years but does not opt for the same in current year. |
| Business eligible for Presumptive Tax Scheme under Section 44AD | Resident Partnership Firm | Taxpayer has opted for the scheme in any of the last 5 previous years but does not opt for the same in current year. |
| Profession eligible for Presumptive Tax Scheme under Section 44ADA | Resident Assessee | Taxpayer claims that his profits from profession are lower than the profits computed under Section 44ADA and total income exceeds the maximum exemption limit |
| Business eligible for Presumptive Tax Scheme un- derSection44AE | Any Assessee engaged in plying, hiring or leasing of goods carriage | Taxpayer claims that his profits from business are lower than the profit computed under Section 44AE |
| Business eligible for Presumptive Tax Scheme un- der Section 44BB | Non-resident assessee engaged in exploration of mineral oil | Taxpayer claims that his profits from business are lower than the profit computed under Section 44BB |
| Business eligible for Presumptive Tax Scheme under Section 44BBB | Foreign Co. engaged in civil construction | Taxpayer claims that his profits from business are lower than the profit computed under Section 44BBB |
