Income Tax

Tax Audit Under Section 44AB: Applicability, Limits & Due Dates

Finin2min Tax Desk·June 2026· FY 2025-26 Limits INCOME TAX

A tax audit is not the same as a regular financial statement audit — it is a specific requirement under Section 44AB of the Income Tax Act that applies once a business or professional crosses certain turnover or receipt thresholds. Missing this requirement attracts a penalty, so knowing whether it applies to you is essential.

What Is a Tax Audit Under Section 44AB?

A tax audit under Section 44AB requires certain taxpayers to get their accounts audited by a Chartered Accountant and furnish an audit report (Form 3CA/3CB along with Form 3CD) before filing their income tax return. It is designed to ensure that books of account are properly maintained and that income is computed correctly for tax purposes.

Applicability for Businesses

A tax audit is mandatory if total sales, turnover or gross receipts in business exceed ₹1 crore in the financial year.
This limit is enhanced to ₹10 crore if cash receipts and cash payments each do not exceed 5% of total receipts/payments — i.e., for businesses that are substantially digital/banking-channel based.

Applicability for Professionals

A tax audit is mandatory for professionals (doctors, lawyers, architects, chartered accountants, consultants, etc.) if gross receipts exceed ₹75 lakh in the financial year. This threshold is separate from the business turnover threshold and applies regardless of cash vs digital transaction mix.

Presumptive Taxation Schemes and Tax Audit

Sections 44AD and 44ADA allow eligible small businesses and professionals to declare income on a presumptive basis (a fixed percentage of turnover/receipts) without maintaining detailed books — and without a tax audit, as long as they stay within limits:

Section 44AD (businesses): Turnover up to ₹2 crore (₹3 crore if cash receipts/payments are within 5%) and income declared at least 6% (digital) or 8% (cash) of turnover.
Section 44ADA (professionals): Gross receipts up to ₹75 lakh and income declared at least 50% of receipts.

If a taxpayer eligible for these schemes declares income lower than the presumptive rate AND their total income exceeds the basic exemption limit, a tax audit becomes mandatory — even if turnover is below the regular 44AB thresholds.

⚠ Opting out has consequences: If you opt out of the presumptive scheme under Section 44AD in any year after using it, you cannot use it again for the next 5 assessment years — and you become subject to mandatory tax audit and regular books of account requirements for those years if your income exceeds the basic exemption limit.

Due Date for Tax Audit Report

The tax audit report must generally be filed by 30th September of the assessment year (for taxpayers not subject to transfer pricing requirements), and the corresponding income tax return must be filed by the same date — earlier than the standard ITR due date for non-audit cases (31st July).

Penalty for Non-Compliance — Section 271B

If a taxpayer required to get a tax audit done fails to do so, or fails to furnish the audit report by the due date, a penalty under Section 271B applies — the lower of 0.5% of total sales/turnover/gross receipts, or ₹1,50,000. The penalty can be waived if there was a "reasonable cause" for the failure, but this is at the discretion of the assessing officer.

Quick Reference: Who Needs a Tax Audit

Category	Threshold
Business (cash-heavy)	Turnover > ₹1 crore
Business (≤5% cash transactions)	Turnover > ₹10 crore
Profession	Gross receipts > ₹75 lakh
44AD opted but income below presumptive rate + total income > exemption limit	Audit mandatory
44ADA opted but income below 50% + total income > exemption limit	Audit mandatory

Frequently Asked Questions

Is a tax audit the same as a statutory audit under the Companies Act? ▼

No. A statutory audit under the Companies Act applies to companies regardless of turnover and examines the financial statements as a whole. A tax audit under Section 44AB is specific to income tax compliance and applies to businesses/professionals (including companies, firms, and individuals) once turnover/receipt thresholds are crossed. A company may require both audits, often performed together by the same auditor.

If my turnover is below ₹1 crore, can a tax audit still apply to me? ▼

Yes, in one scenario — if you are eligible for presumptive taxation under Section 44AD but declare profits below the prescribed presumptive rate, and your total income exceeds the basic exemption limit, a tax audit becomes mandatory even though turnover is below ₹1 crore.

What is the enhanced ₹10 crore turnover limit for tax audit? ▼

For businesses where cash receipts and cash payments each do not exceed 5% of the total receipts and payments respectively during the year, the tax audit turnover threshold is raised from ₹1 crore to ₹10 crore — effectively exempting largely digital businesses from audit up to a much higher turnover.