Changes in Rules related to Tax Audit under the Income Tax Act, 1961

Every person who derives income by way of Business or profession and has not opted for computation of income on presumptive basis under section 44AD, 44ADA or 44AE of the Income-tax Act, 1961 has to get tax audit done provided his income exceeds the prescribed threshold limit.

​As per section 44AB, following persons are compulsorily required to get their accounts audited:

• A person carrying on business if the total sales/ turnover exceed Rs. 1 crore during the previous year relevant to assessment year.
• A person carrying on profession if the Gross receipts exceed Rs. 50 lakhs during the previous year relevant to assessment year.

Normally, an assessee who opts for presumptive taxation is not required to get his books of accounts audited. However, in certain cases such assessees may also become liable for tax audit.

• The person who has opted for computing profits and gains of business on presumptive basis under section 44AD earlier and 5 years have not lapsed since then but the assessee has opted out of such presumptive income and his income exceeds the ceiling for chargeability of income tax, is also required to get tax audit done.
• Further where a person has opted for presumptive scheme under section 44ADA and he claims his income lower than the deemed profits and his income exceeds the ceiling for chargeability of income tax, is also required to get tax audit done.
• Tax audit is also mandatory for the assessees opting for presumptive scheme under section 44AE, 44BB and 44BBB and claiming income lower than the deemed profits.

In order to reduce compliance burden on small and medium enterprises, it is proposed in the Budget 2020 to increase the threshold limit for a person carrying on business from 1 Crore to Rs. 5 Crore in cases where:

• 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
• 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.

• In case of persons having income from business or profession and required to get their accounts audited, the tax audit report may be furnished by the said assessee at least one month prior to the due date of filing of return of income under sub-section (1) of Section 139.
• Accordingly, the due date for filing return of income under section 139 (1) is proposed to be amended.
• For aforesaid assessees the due date of filing of Income Tax Return would be 31st October of the assessment year (as against 30th September).
• Similarly, the Audit Report must be submitted on or before 30th September of the assessment year.