(i) Proposed Amendment

In section 44AB of the Income-tax Act, with effect from the 1st day of April, 2011,-

(a) in clause (a), for the words “forty lakh rupees”, the words “sixty lakh rupees” shall be substituted;

(b) in clause (b), for the words “ten lakh rupees”, the words “fifteen lakh rupees” shall be substituted. Amendment of section 271B:-

In section 27 1B of the Income-tax Act, for the words “one hundred thousand rupees”, the words “one hundred fifty thousand rupees” shall be substituted with effect from the 1st day of April, 2011.

(ii) From Notes on Clauses

Clause 14 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.

The existing provisions contained in clause (a) of the aforesaid section make it obligatory for every person carrying on business to get his accounts of any previous year relevant to the assessment year audited by an accountant before the specified date if the total sales, turnover or gross receipts in business for the previous year exceeds forty lakh rupees.

It is proposed to enhance the said limit from forty lakh rupees to sixty lakh rupees.

The existing provisions contained in clause (b) of the aforesaid section make it obligatory for every person carrying on profession

to get his accounts of any previous year relevant to the assessment year audited by an accountant before the said specified date if his gross receipts in profession for the previous year exceed ten lakh rupees.

It is proposed to enhance the said limit from ten lakh rupees to fifteen lakh rupees.

These amendments will take effect from ast April, 2011, and will, accordingly, apply in relation to the assessment year 2011-2012 and subsequent years.

(iii) From Explanatory Memorandum

A.  Under the existing provisions of section 44AB, every person carrying on business is required to get his accounts audited if the total sales, turnover or gross receipts in business exceed forty lakh rupees in the previous year. Similarly, a person carrying on a profession is required to get his accounts audited if the gross receipts in profession exceed ten lakh rupees in the previous year.

In order to reduce compliance burden of small businesses and professionals, it is proposed to increase the aforesaid threshold limit from forty lakh rupees to sixty lakh rupees in the case of persons carrying on business and from ten lakh rupees to fifteen lakh rupees in the case of persons carrying on profession.

B.In view of the amendment proposed above, it is also proposed to increase the maximum penalty, leviable under section 27 1B for failure to get accounts audited under section 44AB or to furnish a report of such audit, from one lakh rupees to one lakh fifty thousand rupees.

(iv) Effect of the amendment

  • Persons carrying on business / profession are required to get their accounts audited, if their turnover exceeded the threshold limit of Rs. 40.00 lacs for business and Rs. 10.00 lacs for profession. These limits were fixed w.e.f A.Y. 85-86.
  • For giving relief to the small assessees, it is proposed to raise the said threshold to Rs. 60.00 lacs for business and Rs. 15.00 lacs for professionals and accordingly the assesses, who have their receipts below these thresholds will not be required to get their accounts audited under section 44AB.

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