Section 44AB deals with the limit for conducting Tax audit under the Income Tax Act. For Individual, HUF and firm they can skip Tax audit upto a certain turnover limit under section 44AD of the Income tax act.
However, for Companies and LLP they have to follow the limit prescribed u/s 44AB only to get their books of accounts audited as per Section 44AB of the Act. Lets’ discuss what is the turnover limit prescribed under clause (a) of section 44AB of the Act:
“Every person,-
(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year :
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” ten crore rupees” had been substituted:
Provided further that for the purposes of this clause, the payment or receipt, as the case may be, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the payment or receipt, as the case may be, in cash; or]”
Thus, considering the above provision it can be said that the turnover limit for conducting the tax audit is Rs. 1 crore. Hence, if a person carrying on a business has turnover exceeding Rs. 1 crore then he shall be required to get his books of accounts audited as per Income Tax Act from a Chartered Accountant as prescribed under Section 288 of the Income Tax Act.
However, there is an exception wherein the turnover limit mentioned above would be increased to Rs. 10 crore from Rs. 1 crore wherein total cash receipts does not exceed 5% of aggregate receipts, sales turnover etc and cash payment does not exceed 5% of aggregate payment.
If both the conditions are fulfilled then the assessee won’t be required to conduct tax audit even if turnover exceeds Rs. 1 crore but does not exceed Rs. 10 crore in a financial year.
Earlier the increased limit was 5 crore instead of Rs. 10 crore.
| Type of Person | Turnover limit | Remarks |
| Any person who is doing business (Except covered under section 44AD) | Rs. 1 crore (if not falling within below mentioned limit) | |
| Rs. 10 crore | If cash receipts and cash payment does not exceed 5% of total receipt and total payment respectively. |
Please note that the Tax audit limit prescribed above is only for business and for person running profession the limit would be different.
You can book phone consultation/ assistance online with expert as mentioned below:
To book ITR filing with experts CLICK ME.
To book phone consultation with experts for any Income tax related matters CLICK ME.
To book consultation for Faceless Assessment with experts CLICK ME.
To book phone consultation with experts for GST related matters CLICK ME.
To book general phone consultation with expert CLICK ME.
