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Threshold Limit for Tax Audit increased to Rs. 5 crore  [Applicable from Assessment Year 2021-22]

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

Amendments of ‘Residential Status’ for Assessment Year 2021-22 Tax Amendments in Finance Bill 2020 Due Date for Filing of Tax Audit Report Delinked from Due Date for Filing of Return of Income from Assessment Year 2021-22
Income Tax Slab for Financial Year 2020-21 (AY : 2021-22)



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Tax Amendments in Finance Bill 2020

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Guide & Taxation with Amendments made by the Finance Act. 2018 and the Rules as amended till Date.


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