What is Income Tax Audit Limit for AY 2024-25?

 

The Income Tax Audit is a crucial process mandated by the Income Tax Act of India, requiring certain taxpayers to have their financial accounts examined and verified by a certified Chartered Accountant (CA). For the Assessment Year (AY) 2024-25, the audit limits have been specified to ensure transparency and compliance among businesses and professionals.

The audit limit refers to the threshold above which taxpayers must undergo an audit of their financial records. For AY 2024-25, the limits are categorized based on the nature of the taxpayer’s business or profession and their turnover or gross receipts.

For Businesses:

Normal Business: If the total sales, turnover, or gross receipts of a business exceed ₹1 crore during the financial year 2023-24, an audit is mandatory.

Presumptive Taxation Scheme (Section 44AD): For businesses opting for the presumptive taxation scheme under Section 44AD, the audit limit is ₹2 crore. However, this applies if the business has not opted for the scheme in any of the preceding five years.

For Professionals:

Normal Profession: If the gross receipts from a profession exceed ₹50 lakhs during the financial year 2023-24, an audit is mandatory.

Presumptive Taxation Scheme (Section 44ADA): For professionals opting for the presumptive taxation scheme under Section 44ADA, the limit is ₹50 lakhs.

Cash Transactions:

For businesses with cash transactions exceeding 5% of the total receipts or total payments, the audit limit under Section 44AB is reduced to ₹10 crore. This provision aims to promote digital transactions and reduce cash dealings.

Preparing for an Income Tax Audit

Taxpayers likely to meet the audit criteria for AY 2024-25 should start preparing well in advance. This preparation includes maintaining accurate and detailed financial records, ensuring all transactions are well-documented, and seeking professional advice when necessary.

Organize Financial Records: Keep all financial documents, including invoices, receipts, bank statements, and ledgers, well-organized.

Regular Review: Conduct regular reviews of financial statements to ensure accuracy and compliance.

Consult a CA: Engage a Chartered Accountant to review your accounts and ensure they meet all statutory requirements.

Conclusion:

The Income Tax Audit limits for AY 2024-25 aim to uphold the integrity and transparency of the financial reporting system in India. By setting clear thresholds, the government ensures that the audit process is efficient and effective, targeting businesses and professionals with substantial economic activity. Taxpayers must be proactive in understanding these limits and preparing accordingly to ensure compliance and avoid potential issues during the audit process.

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