Tax Audit Limit for Professionals Increased to 50 Lakhs

Increase in threshold limit for audit for persons having income from profession

Under the existing provisions of section 44AB of the Act every person carrying on a profession is required to get his accounts audited if the total gross receipts in a previous year exceed twenty five lakh rupees.

In order to reduce the compliance burden, it is proposed to increase the threshold limit of total gross receipts, specified under section 44AB for getting accounts audited, from twenty five lakh rupees to fifty lakh rupees in the case of persons carrying on profession.

These amendments will take effect from 1^st April, 2017 and will, accordingly, apply to the assessment year 2017-18 and subsequent assessment years.

Clause 25 of the Finance Bill 2016-17

Clause 25 of the Bill seeks to amend section 44AB of the Income-tax Act relating to audit of accounts of certain persons carrying on business or profession.

Sub-clause (i) of the said clause seeks to amend clause (b) of the aforesaid section. The said clause provides that every person carrying on a profession is required to get his accounts audited before the specified date if his gross receipts in a previous year exceed twenty-five lakh rupees.

It is proposed to amend the said clause (b) so as to increase the threshold limit to fifty lakh rupees.

Sub-clause (ii) of the said clause seeks to amend clause (d) of the said section so as to provide that in the case of an assessee, who is covered under the new proposed section 44ADA, the audit of books of account is required if he claims that the profits and gains from the profession are lower than the profits and gains computed in accordance with the provisions of sub-section (1) of the proposed new section and if his income exceeds the maximum amount which is not chargeable to income-tax.

Sub-clause (iii) of the said clause seeks to insert a new clause (e) in the said section so as to provide that every person carrying on the 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, keep and maintain such books of account and other documents for computing his total income in accordance with the provisions of this Act.

These amendments will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017- 2018 and subsequent years.

Amendment of section 44AB.

In section 44AB of the Income-tax Act, with effect from the 1st day of April, 2017,—                                

(i) in clause (b), for the words “twenty-five lakh rupees”, the words “fifty lakh rupees” shall be substituted;

(ii) in clause (d),—

(a) for the word “business” wherever it occurs, the word “profession” shall be substituted;

(b) for the words, figures and letters “under section 44AD”, the words, figures and letters “under section 44ADA” shall be substituted;

(c) for the words “previous year”, the words “previous year; or” shall be substituted;

(iii) after clause (d) and before the long line, the following clause shall be inserted, namely:—

“(e) carrying on the 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,”.

(Republished with Amendments)

Tax Audit Limit for Business Rs. 2 Crore & for Profession Rs. 1 Crore