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Home >Budget >News >Budget 2021 increases tax audit limit to 10 crore, reduces compliance burden

Announcement: In Budget 2021, Finance Minister Nirmala Sitharaman proposed to offer major relief for companies that transact digitally. Thus, to incentivise non-cash digital transactions and to reduce the burden of compliance of small and medium enterprises, the government has now increased the threshold limit from 5 crore to 10 crore.

Implication: Every person carrying on business or profession is required to get his accounts audited by an accountant (and file tax audit report) if his total sales/turnover/gross receipts exceed a specified limit. "Last year, i.e., vide Finance Act 2020, such limit for a person carrying on business was increased from 1 crore to 5 crore, subject to a condition that cash receipts and cash payments during the year do not exceed 5% of the total receipts/payments. The Finance Bill 2021 proposes to further increase this limit from 5 crore to 10 crore. Accordingly, any person carrying on business shall now not be required to get his accounts audited by an accountant (and file tax audit report) if his total sales/ turnover/ gross receipts do not exceed 10 crore and cash receipts and cash payments during the year do not exceed 5% of total receipts/payments," said Himanshu Parekh, Partner and Head - Corporate and International Tax, KPMG in India.

Context: "As per section 44AB of the Income Tax Act,1961, any person carrying the business is required to get his books of accounts audited if the gross receipts/turnover exceeds 1 crore during the year (In case of presumptive taxation u/s 44AD, the threshold limit is 2 crore). However, if the person is carrying on profession then an audit of books of accounts is mandatory if gross receipts/turnover exceeds 50 lakh," said Abhishek Soni, CEO and co-founder, Tax2win.in.

In Budget 2020, the limit of 1 crore was increased to 5 crore for the person carrying on business to ease the compliance for small taxpayers and to promote cashless business transaction on satisfying few conditions which are:

  • The aggregate of all cash receipts during the year does not exceed 5% of total receipts
  • The aggregate of all cash payments during the year does not exceed 5% of total payments


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