Applicability of Tax Audit as per Finance Act, 2020 w.e.f. 01.04.2020

• October 26, 2020
• CA Chandan Agarwal's Office

Pursuant to clause (a) of Section 44AB of the Income Tax Act, 1961 (‘the IT Act’), Tax Audit is mandatory if business is having total sales, turnover or gross receipts more than Rs. 1 crore in any Previous Year (‘PY’). Clause (a) of Section 44AB of the IT Act read as under-

‘(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case maybe, in business exceed or exceeds one crore rupees in any previous year.’

However, in order to reduce compliance burden for small assessee, Finance Act, 2020 w.e.f. 01.04.2020 has brought major amendment to IT Act related to applicability of Tax Audit. By the Finance Act, 2020 a proviso has been inserted in Section 44AB(a) of the IT Act which may be read as under-

“Provided that in the case of a person whose—

(a) aggregate of all amounts received including amount received for sales, turnover or gross receipts during the previous year, in cash, does not exceed five per cent of the said amount; and

(b) aggregate of all payments made including amount incurred for expenditure, in cash, during the previous year does not exceed five per cent of the said payment, this clause shall have effect as if for the words “one crore rupees”, the words “five crore rupees” had been substituted; or”

Read more on: https://taxguru.in/income-tax/applicability-tax-audit-finance-act-2020-w-e-f-01-04-2020.html