Union Budget-2021

Pierian’s analysis on Amendments in relation to Profits & Gains from Business & Profession.

Increase in threshold limit for applicability of Tax Audit

The Budget proposes to increase the turnover threshold from INR 5 crore to INR 10 crore for mandatory tax audits for every person carrying on a business. The essential condition is that cash receipts and payments do not exceed 5% of the total receipts and total payments, respectively.

Benefit of Presumptive Taxation to Professional Partnership Firms

The Budget proposes to include professional partnership firm for professions referred to section 44AA(1) whose total gross receipts do not exceed INR 50 lakhs to avail the presumptive taxation. As per the proposed amendment, a sum equal to fifty percent of the total gross receipts of the assessee in the previous year on account of such profession or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the assessee, shall be deemed to be the profits and gains of such profession chargeable to tax under the head Profits and gains of business or profession for such professional firms.

Controversy in relation to Goodwill and Depreciation settled

The budget proposes to amend Section 2(11) and section 32(1)(ii) to exclude goodwill from the block of assets thus rendering it ineligible for claiming depreciation allowance. It is further proposed to amend Section 50 of the Act for cases where goodwill of a business or profession formed part of a block of assets for the assessment year beginning on the 1st April, 2020 and depreciation has been obtained by the assessee under the Act, the written down value of that block of assets and short-term capital gain, if any, shall be determined in the manner as may be prescribed.