The Finance Bill, 2020 has brought a major amendment to section 44AB of the income tax act. After insertion of such changes, Tax Audit limit has been increased from Rs 1 crore to 5 crores provided the taxpayer has
- Cash receipts which is not more than 5% of aggregate total receipts;
- Cash Payment which is not more than 5% of aggregate total payments.
Even though profit shown is not up to 6%/8% of the total receipts.
Other than above conditions; turnover of companies and individual/HUF/Firms of the previous year exceeds Rs.1 Cr and Rs. 2Cr respectively tax audit will be applicable subject to the profit declaration of profit up to 6%/8% of the total receipts.
Presently if the turnover of an assessee does not exceed Rs. 2 crores and he does not show profits equal to 6% or 8% as per 44AD, he is liable to maintain books of accounts u/s 44AA and get his accounts audited u/s 44AB.
As per the Budget 2020, an assessee having cash receipts and payments not exceeding 5%, is not liable for tax audit if his turnover does not exceed Rs. 5 crores.
Due to the proposed change in budget 2020 the situation stands as follows,
- Assesse having turnover exceeding Rs.2 crores but below 5 crores having Cash receipts and cash payments not exceeding 5%, he is NOT liable to Tax Audit. This is applicable even if the assessee showing profits up to 6% or 8% as per 44AD or not.
- Assesse having turnover not exceeding Rs.2 crores having cash receipts and cash payments not exceeding 5%, he is liable to Tax Audit if he does not show profits up to 6% or 8% as per 44AD.