Proviso to Clause (a) of Section 44AB of the Income Tax Act, 1961, relating to audit of accounts of certain persons carrying on business or profession, has been amended by the Finance Act, 2021 to enhance the Tax Audit Exemption threshold limit from Rs. 5 crore to Rs. 10 crore, applicable in the case of taxpayers having 95% or more Digital Turnover, with effect from 01/04/2021 (AY 2021-22).
The turnover threshold for tax audit has been enhanced, to incentivise digital transactions and to reduce the compliance burden of the person who is conducting at least 95% of the transactions digitally, subject to the condition that aggregate cash receipts/ payments of the person carrying on business do not exceed 5% of total receipts/ payments in a financial year.
Earlier, the Finance Act, 2020 has increased the tax audit threshold limit for such persons from Rs. 1 crore to Rs. 5 crore, by inserting proviso in Clause (a) of IT Section 44AB. However, for all other persons the tax audit threshold limit u/s 44AB continues to be at Rs. 1 crore.
It may be noted that the clause (a) of Section 44AB mandates tax audit of accounts in the case of every person carrying on business, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year.
Amendment in Section 44AB: Audit of accounts of certain persons carrying on business or profession.
Section 44AB of the Income Tax Act, 1961 has been amended vide Section 13 of the Finance Act, 2021, as under:
“In section 44AB of the Income-tax Act, in clause (a),-
(i) in the proviso, in long line, for the words “five crore rupees”, the words “ten crore rupees” shall be substituted;
(ii) after the proviso, the following proviso shall be inserted, namely:-
Provided further that for the purposes of this clause, the payment or receipt, as the case may be, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the payment or receipt, as the case may be, in cash.”