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

Correct option is A

Tax audit is governed by Section 44AB of the Income Tax Act, 1961. It is a mandatory audit required for certain businesses and professionals to ensure compliance with tax laws, accurate reporting of income, and proper maintenance of accounts.

For a business, tax audit is required if the gross turnover or receipts exceed ₹1 crore in a financial year. However, if cash transactions (receipts + payments) do not exceed 5% of total transactions, the limit increases to ₹10 crores as per the Finance Act, 2020.

For a profession, tax audit is required if the gross receipts exceed ₹50 lakh in a financial year.

Applicability of Tax Audit under Section 44AB:

Information Booster:

• Section 44AB of the Income Tax Act, 1961 makes tax audit mandatory for businesses exceeding a turnover of ₹1 crore in a financial year.

• Rule Change (2020): If the aggregate of cash receipts and payments does not exceed 5%, then the threshold is extended to ₹10 crores.

• Purpose of Tax Audit:
  • To ensure proper maintenance of accounts
  • To detect and prevent tax evasion
  • To ensure that deductions and exemptions are correctly claimed

Additional Knowledge:

(b) Rs. 40 lakh 

• Incorrect because there is no tax audit requirement at ₹40 lakh turnover for businesses under Section 44AB.
  

(c) Rs. 50 lakh 

• Incorrect because ₹50 lakh is the threshold for professionals, not businesses.
• If a professional (like a doctor, CA, or lawyer) earns more than ₹50 lakh, they must get a tax audit.
• However, a business person needs a tax audit only if turnover exceeds ₹1 crore.

(d) Rs. 60 lakh 

• Incorrect because there is no tax audit requirement at ₹60 lakh for businesses.
• Businesses below ₹1 crore turnover are not subject to tax audit, unless they opt for presumptive taxation under Section 44AD and declare profits below 6% (digital transactions) or 8% (cash transactions).