Section 44AB – Tax Audit Limit increased to Rs. 5 crore

Home   /   Section 44AB – Tax Audit Limit increased to Rs. 5 crore

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 ProfessionCategory of TaxpayerWhen audit is Mandatory?
Any Professions (Specified or Non-specified)AnyIf Gross Receipts from Profession during the relevant previous year exceeds Rs.50 lakhs
BusinessBothe 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 respectivelyIf 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 HUFIf 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 FirmTaxpayer 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 AssesseeTaxpayer 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 carriageTaxpayer 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 oilTaxpayer 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 constructionTaxpayer claims that his profits from business are lower than the profit computed under Section 44BBB

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