Abolition of Tax Audit: Rs. 5 Cr limit is the beginning? What tax professional must do?
There was news about the proposal to abolish the tax audit provision before the Budget 2020, which was dropped thereafter, probably considering the unexpected consequences that may arise.
However, the signal given by Union Budget 2020 is alarming. Section 44AB was introduced to provide that the businessmen with turnover not exceeding Rs. 5 Cr is not liable for tax audit. Of course, the rider is there that the total receipts / payment should not exceed 5%. However, the fact remains that there is now a category of person with turnover up to Rs. 5 Cr who are not required to get their books of account audited.
The thought process of the policy makers can very well be visualized by anyone now. Question by the policy makers is simple, Why is the audit required if the person is doing the transactions in digital mode?
There are a lot many taxpayers who are doing digital transactions who are benefited by the new limit of Rs. 5 Cr.
The limit of Rs. 5 Cr as was announced in the previous budget may now be enhanced further. If it happens then there will be a lot more new categories of the taxpayers who will move outside the net of the tax audit limit. The logic behind these enhancements is that there exists sufficient system of cross verifying the information furnished by the taxpayers in the ITR which may enable the department to do away with the need of furnishing the tax audit report.
More particularly, the ITR forms require assessee to submit the information with regard to expenses under different heads. The same can automatically be cross verified by the system with the TDS portal to ensure there is reasonable compliance with the TDS provisions.
Similarly, the ITR forms for such cases may be amended so as to furnish the name & details of a person who has given unsecured loans and so the required details of the tax audit could be done away with.
Similarly, details may be obtained by adding a few more columns in the ITR forms so as to do away with the need of seeking information from the tax auditor. In short, the verification and reporting from the CA may be replaced by the “self certification” model in days to come.
Many professionals are too much dependent on the tax audit as their prime area of practice. This is the time to think ahead of time and need to diversify in other lucrative areas of the practice rather than merely depending upon the tax audit as their hard core area. The tax auditor needs to look beyond the traditional areas of the practice and explore the newer opportunities. The major professionals who would be hit by the abolition of the tax audit are the professionals from the rural area who find it difficult to get other work. Such professionals can align their activities with the CA from metro cities to execute the work from rural areas. We will explore few such areas of practice in www.TheTAXtalk.com
Till then, let us keep exploring newer areas of practice.
