This discussion clarifies the income tax audit limits for the financial year 2019-20. For businesses, the turnover threshold for mandatory tax audit was Rs 1 crore, while for professionals, it was Rs 50 lakhs in gross receipts. The conversation also touches upon the increased limit to Rs 5 crore for FY 2020-21 under certain conditions, and queries about subsequent financial years.
As per the Provision of Section 44AB of the Income Tax Act 1961, TAX AUDIT OF ACCOUNTS is mandatory when :
Incase of BUSINESS : When your Turnover in Business exceeds Rs. 1 crore.
Incase of PROFESSION : When your Gross Receipts in Profession exceeds Rs. 50 lakhs.
For FY 2020-21 :
Section 44AB of the Income Tax Act 1961 was amended vide the Finance Act 2020. The limit of Tax Audit was increased to "Rs. 5 CRORE" in case of Business from Rs. 1 crore.
A taxpayer is required to have a tax audit carried out if the sales, turnover, or gross receipts of business exceed Rs 1 crore in the financial year. However, a taxpayer may be required to get their accounts audited in certain other circumstances. We have categorized the various circumstances in the tables mentioned below:
NOTE: The threshold limit of Rs 1 crore for a tax audit is proposed to be increased to Rs 5 crore with effect from AY 2020-21 (FY 2019-20) if the taxpayer’s cash receipts are limited to 5% of the gross receipts or turnover, and if the taxpayer’s cash payments are limited to 5% of the aggregate payments.