Applicability of Tax Audit for AY 2021-22

A. Tax Audit Limit for Individual/HUF/firm engaged in Business:

1. Turnover exceeds Rs. 5 crore:

Tax Audit under the Income Tax Act 1961 is applicable to all entities if the total sales, turnover or gross receipts (as the case may be) in a business for the year exceeds Rs. 5 crore.

2. Turnover is between Rs. 2 crore to Rs. 5 crore:

If the Turnover during the previous year is between Rs. 2 crore & Rs. 5 crore AND the cash payments & cash receipts both in a year do not exceed 5% of the total payments & receipts respectively, i.e., more than 95% of the business is done via banking channels, then there is no requirement to get tax audit done by the assessee. However in case either of the cash receipts & payments exceed 5% of the total payments & receipts, then even if the turnover is between Rs. 2 crore to Rs. 5 crore, tax audit u/s 44AB (a) will become applicable.

3. Turnover between Rs. 1 crore to Rs. 2 crore:

Tax Audit u/s 44AB (a) shall be applicable only if the assessee shows net profit lower than 8% or 6% of its turnover. If the profit shown is more than 8% or 6% of turnover, then there is no requirement to get tax audit done by the assessee.

4. Turnover less than Rs. 1 crore:

Tax Audit u/s 44AD (e) shall be applicable only if the assessee shows net profit lower than 8% or 6% of its turnover. If the profit shown is more than 8% or 6% of turnover, then there is no requirement to get tax audit done by the assessee.

B. Tax Audit Limit for Individual/HUF/firm engaged in Profession:

If the turnover exceeds Rs. 50 lakh or if the turnover is less than Rs. 50 lakh but net profit shown is less than 50% of the turnover, then tax audit u/s 44AB (a) is applicable.

Only when an assessse has turnover of less than Rs. 50 lakh & shows net profit exceeding 50 % of turnover, the there is no requirement to get tax audit done by the assessee.

C. Tax Audit Limit for Companies/Other Persons engaged in Business:

1. Turnover exceeds Rs. 5 crore:

Tax Audit under the Income Tax Act 1961 is applicable if the total sales, turnover or gross receipts (as the case may be) in a business for the year exceeds Rs. 5 crore.

2. Turnover between Rs. 1 crore to Rs. 5 crore:

If the Turnover during the previous year is between Rs. 1 crore & Rs. 5 crore AND the cash payments & cash receipts both in a year do not exceed 5% of the total payments & receipts respectively, i.e., more than 95% of the business is done via banking channels, then there is no requirement to get tax audit done by the assessee. However in case either of the cash receipts & payments exceed 5% of the total payments & receipts, then even if the turnover is between Rs. 1 crore to Rs. 5 crore, tax audit u/s 44AB (a) will become applicable.

3. Turnover less than Rs. 1 crore:

Tax Audit is not applicable under the Income Tax Act 1961.