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Tax Audit is compulsory in case a person is carrying on a business whose gross turn over/receipts exceeds:

Tax Audit is compulsory in case a person is carrying on a business whose gross turn over/receipts exceeds: Correct Answer Rs. 1 crore

The correct answer is 1 crore

Key PointsTax Audit: 

A tax audit is an examination of a tax return by the IRS to verify that your income and deductions are precise. 

Important Points

As per Section 44AB of the Income Tax Act, 1961:

  • Every person carrying on a business is entitled to get his accounts audited, if his turnover, total sales, or gross receipts in business exceeds Rs. 1 crore in the previous year
  • Every person carrying on a profession is entitled to get his accounts audited if his gross receipts in profession exceed Rs. 50 lakhs in the previous year.

Therefore, a tax audit is compulsory in case of a person is carrying on a business whose gross turnover exceeds Rs. 1 crore.

With effect from 1st April 2020, that is from the assessment year 2020-21, the above provision is amended as follows:

The threshold limit has been revised to increase it for a person carrying on a business from Rs. 1 crore to Rs. 5 crore if the following conditions are satisfied:

  • His aggregate of all the cash receipts in the previous year does not exceed 5% of such receipts.
  • His aggregate of all the cash payments in the previous year does not exceed 5% of such payments. 

Related Questions

Which of the following components are true about tax planning?
1. Tax planning is the process of analyzing a financial plan or a situation from a tax perspective.
2. The objective of tax planning is to make sure there is tax efficiency. With the help of tax planning, one can ensure that all elements of a financial plan can function together with maximum tax-efficiency.
3. Reducing tax liability and increasing the ability to make contributions towards retirement plans are critical for success.
4. Tax planning comprises various considerations such as size, the timing of income, timing of purchases, and planning are concerned with other kinds of expenditures.
5. The chosen investments and the various retirement plans should go hand-in-hand with the tax filing status as well as the deductions in order to create the best possible outcome.
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2. A sells the goodwill of his business with an agreement not to carry on a similar business within India, so long as the buyer carries on a similar business.
3. A sells the goodwill of his business with an agreement not to practice the same trade for 25 years.
4. A sells the goodwill of his business with an agreement not to engage in any business competing or liable to compete in any way with the business for the time being carried on by the buyer.
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Tax audit is compulsory in case of a person in a profession whose gross receipts from the profession exceed:
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