Budget 2021-22 + FINANCE Bill, 2021

Rationalisation of provisions relating to tax audit in certain cases

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.

This amendment will take effect from 1st April, 2021 and will accordingly apply for the assessment year 2021-22 and subsequent assessment years.

[Clause 11]

 

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Full Text:

Budget 2021-22 + FINANCE Bill, 2021

Tax audit threshold increased for eligible businesses with limited cash transactions, easing audit compliance from assessment year 2021-22. The Finance Bill, 2021 proposes to raise the higher audit-threshold applicable to businesses that maintain limited cash transactions-specifically where aggregate cash receipts and aggregate cash payments do not exceed the prescribed five percent limits-so as to reduce compliance burden on small and medium enterprises and incentivise non-cash transactions. The amendment is prospective and will apply from 1 April 2021 for the relevant assessment year and thereafter, with existing audit requirements remaining in force where the cash-transaction conditions are not met.