Understanding the 3rd Proviso to Section 44AB: Key Insights

Learn about the 3rd proviso to Section 44AB and how it affects audit thresholds for small businesses.

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The 3rd proviso to section 44AB states that if a person's cash receipts and payments are less than 5% of their total gross receipts or turnover during the previous year, the threshold limit for mandatory audit increases from ₹1 crore to ₹10 crore. This proviso aims to reduce compliance burden for small businesses with mostly digital transactions.

FAQs & Answers

  1. What is the significance of the 3rd proviso to section 44AB? The 3rd proviso to section 44AB helps small businesses by increasing the audit threshold from ₹1 crore to ₹10 crore if cash transactions are less than 5% of total receipts, thereby reducing compliance burdens.
  2. How does the 3rd proviso to section 44AB affect small businesses? It allows small businesses that primarily engage in digital transactions to avoid mandatory audits, making operations simpler and more cost-effective.
  3. What are cash receipts and payments in the context of section 44AB? Cash receipts and payments refer to the actual cash transactions conducted by a business, which are considered when determining compliance with section 44AB.
  4. What is the audit threshold for small businesses under section 44AB? Under the 3rd proviso to section 44AB, small businesses with cash transactions under 5% can enjoy a higher audit threshold of ₹10 crore, instead of the standard ₹1 crore.

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