Tax Audit Limit for FY 2019-20 of The Income Tax Act

Introduction

As per section 44AB of the Income Tax Act 1961, a specified class of persons has to get their books of accounts audited under the said act by a Chartered Accountant to ensure that the taxpayer has maintained proper books of account and has complied with the provisions of the said act.

Tax Audit is to be reported by the Chartered Accountant to Income Tax Department via Form 3CA/CB and Form 3CD along with the Income Tax Return.

Who has to get Tax Audit under section 44AB done ?

Every person who derives income by way of Business or profession and maintains books of accounts 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.The following person are required to get tax audit done in the given cases.

  1.  A person carrying on business if the total sales/ turnover exceeds One crore Rupees during the previous year relevant to assessment year;

    From AY 20-21 (FY - 2019-20), a proviso has been inserted which states that, in case of a person whose:

    Aggregate of all the amounts received including the amount received for sales, turnover or gross receipts during the previous year, in cash does not exceeds 5% of the said amount and;
    Aggregate of all the payments made including amount incurred for expenditure in cash during the previous year does not exceed 5% of the said payments ;

    Then this clause shall have the effect as if the words "One Crore Rupees" shall be substituted with the words "Five Crore Rupees". 

  2. A person carrying on profession if the Gross receipts exceeds Rs. 50 lakhs during the previous year relevant to assessment year.
  3. 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 charge-ability of income tax, is also required to get tax audit done.
  4. Tax audit is also mandatory for the assesses opting for presumptive scheme under section 44AE, 44BB and 44BBB and claiming income lower than the deemed profits.
  5. A person carrying on business shall, if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income tax in any previous year, get his account audited of such previous year by an accountant before the specified date and furnish by that date the report of such audit in prescribed form duly signed and verified by the accountant and setting forth such particulars as may be prescribed;
    Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, turnover or gross receipts,as the case may be, in business does not exceeds two crore rupees in such previous year.
Limit for Tax Audit -  FY 2019-20

There are 3 Criteria for determining whether Tax Audit is applicable or not, further it depend upon case to case basis as depicted in the chart below:
  • Turnover
  • Net Profit (%)
  • Cash Payment and Cash Receipts
1) Tax Audit Limit for Individual/HUF/Firm engaged in business:




2) Tax Audit Limit for Individual/HUF/Firm engaged in Profession


Other Important Points

The due date to file Tax Audit is 31st October 2020 for the FY- 2019-20. If a person fails to conduct the audit, he will be liable for a penalty of the lower of the following:-
  • 0.5% of Turnover or Gross receipts:
  • Rs. 1,50,000

For all Major Changes in ITR (Income Tax Returns) Forms, Please refer:


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