In the Finance Bill 2021, the provisions related to Section 44AB i.e. provisions related to Tax Audit has been rationalised in order to incentivise the non-cash transactions being carried out by the Assessee and to promote the digital economy.
The provisions related to the tax audit shall applies to the assesse whose turnover from the business exceeds Rs. 1 crore in the previous year and in case of profession, the limit is Rs. 50 Lakhs.
In the Finance Act 2020, the amendment has been made to incentive the assesse who is carrying digital transactions. The limit of Rs. 1 Crore has been increased from Rs. 1 Crore to Rs. 5 Crores in the following cases:-
- Aggregate of all receipts in cash during the previous year does not exceed 5% of such receipt; and
- Aggregate of all payments in cash during the previous year does not exceed 5% of such payment.
To further incentivise the non-cash transactions and to promote digital economy, the said limit of Rs. 5 Crores has been increased to Rs. 10 Crores which will be applicable from 1st April 2021 and will accordingly apply for the AY 2021-22 and subsequent assessment years.
For the purpose of Cash receipts and Cash payments, it covers all types of cash receipts and cash payments i.e. cash payment to vendors, expenses, salary, cash sales, payment to vendor, payment from debtors. To elaborate, the definition covers not only the revenue receipts and payments but also the capital receipts and payments.
