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 |
