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February 1, 2021

Know Revise Income Tax Audit Limits for FY 2021-22 AY 2022-23

by Mahesh Mara in Budget, Income Tax

Know Revise Income Tax Audit Limits for FY 2021-22 AY 2022-23

Under section 44AB of the Act, every person carrying on business is required to get his accounts audited, if his total sales, turnover or gross receipts, in business exceed or exceeds one crore rupees in any previous year. In case of a person carrying on profession he is required to get his accounts audited, if his gross receipt in profession exceeds, fifty lakh rupees in any previous year. In order to reduce compliance burden on small and medium enterprises, through Finance Act 2020, the threshold limit for a person carrying on business was increased from one crore rupees to five crore rupees in cases where,-

(i) aggregate of all receipts in cash during the previous year does not exceed five per cent of such receipt; and

(ii) aggregate of all payments in cash during the previous year does not exceed five per cent of such payment.

In order to incentivise non-cash transactions to promote digital economy and to further reduce compliance burden of small and medium enterprises, it is proposed to increase the threshold from five crore rupees to ten crore rupees in cases listed above.

In case of person engaged in business and opting for presumptive taxation under section 44AD:

Turnover limit for the previous yearAmount of profit with respect to turnover (in %)Whether cash receipts less than 5% of the TurnoverWhether cash payment less than 5% of the total paymentIs Tax audit Applicable?
More than 10 CroresNot applicableNot applicableNot applicableYes
More than 2 crore but upto 10 CroreNot applicableYesYesNo
More than 2 crore but upto 10 CroreNot applicableNoNoYes
More than 1 crore but upto 2 CroreMore than 8% or 6% of TurnoverNot applicableNot applicableNo
More than 1 crore but upto 2 CroreLess than 8% or 6% of TurnoverNot applicableNot applicableYes
Less than 1 CroreMore than 8% or 6% of TurnoverNot applicableNot applicableNo
Less than 1 CroreLess than 8% or 6% of TurnoverNot applicableNot applicableYes

In case of person engaged in profession and opting for presumptive taxation under section 44ADA:

Turnover limit for the previous yearAmount of profit with respect to turnover (in %)Is audit Applicable?
More than 50 LakhsNot applicableYes 44AB(b)
Upto 50 LakhsMore than 50%No
Upto 50 Lakhsless than 50% (sec 44ADA)Yes 44AB(d)

Note:

  • If total income exceeds basic exemption limit only then tax audit is applicable.
  • Where the assesse is covered under section 44AB then he is required to get the books of accounts audited by a Chartered Accountant.
  • The tax audit report should be furnished in form 3CB CD, where the report of the tax audit conducted by the chartered accountant is to be furnished in Form No. 3CB and the details of audit are to be reported in Form No. 3CD.
  • In case the assesse is liable for tax audit and he fails to conduct audit of books of accounts than he is liable for a penalty of lower of the below two:
    • 0.5% of the turnover or gross receipts, or
    • Rs. 1,50,000.

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