Budget 2020: Small Businesses' Turnover Threshold For Audit Increased Five-Fold To Rs 5 Crore

Budget 2020: Currently, businesses having turnover of more than Rs 1 crore are required to get their books of accounts audited by an accountant.

Budget 2020: Small Businesses' Turnover Threshold For Audit Increased Five-Fold To Rs 5 Crore

Finance Minister Nirmala Sitharaman said start-ups have emerged as engines of growth for the economy

New Delhi:

To reduce compliance burden on small retailers, traders and shopkeepers part of the medium, small and micro enterprises (MSME) sector, Finance Minister Nirmala Sitharaman proposed to raise by five times the turnover threshold for audit from the existing Rs 1 crore to 5 crore in her second Union Budget. 

However, the increased limit will apply only to those businesses which carry out less than five per cent of their business transactions in cash, the Finance Minister said while presenting the Union Budget 2020-21 in Parliament.

Currently, businesses having turnover of more than Rs 1 crore are required to get their books of accounts audited by an accountant.

To give a boost to the start-up ecosystem, the Budget proposes to ease the taxation burden on employees by deferring the tax payment on employee stock options (ESOPs) by five years or till they leave the company or when they sell their shares.

The Finance Minister said that start-ups have emerged as engines of growth for the economy. Over the past year, the government has taken several measures to handhold them and support their growth.

During their formative years, start-ups generally use ESOPs to attract and retain highly talented employees. Currently, ESOPs are taxable as perquisites at the time of exercise. This leads to a cash-flow problem for the employees who do not sell the shares immediately and continue to hold the same for the long-term.

Further, an eligible start-up having turnover of up to Rs 25 crore is allowed deduction of 100 per cent of its profits for three consecutive assessment years out of seven years if the total turnover does not exceed Rs 25 crore.

The Budget has proposed to extend the turnover limit from the existing Rs 25 crore to Rs 100 crore. Moreover, the Budget proposes to extend the period of eligibility for a claim of deduction from the existing seven years to 10 years.