Tax Audit Limits refer to the threshold limits under the Income Tax Act, 1961, beyond which businesses and professionals in India are required to get their accounts audited by a Chartered Accountant. These audits fall under Section 44AB of the Act and aim to ensure transparency and accuracy in income reporting.
As per current regulations, if a business has total sales, turnover, or gross receipts exceeding ₹1 crore in a financial year, a tax audit is generally mandatory. However, this limit is extended to ₹10 crore if the business’s cash receipts and payments do not exceed 5% of total transactions. For professionals, such as doctors, lawyers, or consultants, the audit becomes necessary if gross receipts exceed ₹50 lakh in a financial year.
These limits are crucial for ensuring income is correctly declared and taxes are fairly paid. Not complying with tax audit provisions can lead to penalties under Section 271B of the Act.
For small business owners and startups, understanding Tax Audit Limits is vital during income tax filing, financial planning, and when scaling operations. It helps in staying compliant and avoiding unnecessary scrutiny from the tax department.
To learn more about income tax compliance and professional support, visit FinTax24’s Income Tax Solutions.