The limit of ₹5 cr was further proposed to increase to ₹10 cr to promote the digital economy and to reduce the compliance burden on small-medium taxpayers
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