The tax audit limit increased to Rs. 10 crore to promote the digital economy and to reduce the compliance burden on small-medium enterprises.
Under section 44AB of the Act (Income Tax Act, 1961) 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 the 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) the aggregate of all receipts in cash during the previous year does not exceed five percent of such receipt; and
(ii) the aggregate of all payments in cash during the previous year does not exceed five percent of such payment.
In order to incentivise non-cash transactions to promote the digital economy and to further, reduce the compliance burden of small and medium enterprises, it is proposed to increase the threshold from five crore rupees to ten crore rupees in the cases listed above.
This amendment will take effect from 1st April, 2021, and will accordingly apply for the assessment year 2021-22 and subsequent assessment years.
Source: Union Budget
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