Tax Audit Turnover limit to be Rs 1 crore again from A.Y 2021-22 ?
Every person carrying on business and maintaining books of accounts is required to get them audited by a Chartered Accountant if total sales, turnover or gross receipts from the business exceeds Rs 1 crore during the previous year
Finance Act 2020 had increased the limit of Rs 1 crore to Rs 5 crore, subject to certain conditions, to reduce the compliance burden of assesses The condition was that
i. not more than 5% of total receipts should be in cash. Here receipts included not only receipts from sales, but all other types transactions like debtors collection, taking loan etc.. and
ii. not more than 5% of total payments should be in cash. Here payments include all types of payment like repayment of loan, payment to creditors etc..
In short, if the cash receipts and cash payment during the year did not exceed 5% of the total receipts or payment for the year then assessee can avail higher threshold, and needs to get his books audited only if his turnover exceeds Rs 5 crore.
The Finance Bill 2021 proposed to increase this turnover from Rs 5 crore to Rs 10 crore.
However, the Finance Act passed by the Lok Sabha has inserted a provisio that payments or receipts settled through non-account payee cheque or bank draft shall be deemed to be cash payment or cash receipt for the computation of the 5% limit.
Since this amendment is applicable for A.Y 2021-22, for many assessees who has not retained evidence of mode of payment will find that their turnover limit for tax audit u/s 44AB will fall back to 1 crore during Previous Year 2020-21. Similarly for coming assessment years, assessee will find themselves having to maintain additional records relating to mode of each payment in order to claim higher threshold limit for tax audit of Rs 10 crore.