Tax audit applicability under Section 44AB for AY 2026-27
A tax audit under Section 44AB applies if your business turnover exceeds Rs 1 crore in FY 2025-26 (or Rs 10 crore if cash receipts and payments are each 5% or less of the total), or if your professional gross receipts exceed Rs 50 lakh. It can also apply below these limits if you declared presumptive income in an earlier year and now report lower profit or a loss.
Who this applies to
Section 44AB covers three groups separately: businesses (proprietorships, partnership firms, LLPs, and companies) crossing the turnover threshold, professionals (doctors, lawyers, consultants, architects, and similar) crossing the gross receipts threshold, and anyone caught by the presumptive taxation opt-out rule regardless of turnover. Each group has its own threshold and its own set of things worth double-checking before assuming you're exempt.
The three thresholds that matter
For a business, the basic threshold is turnover above Rs 1 crore. This rises to Rs 10 crore if your cash receipts and cash payments during the year are each 5% or less of your total receipts and payments — a relaxation meant to reward businesses that operate mostly through banking channels. For professionals, the threshold is a flat Rs 50 lakh in gross receipts, with no cash-based relaxation. There's no partial audit — either the whole business/profession is audited, or none of it is.
The presumptive opt-out exception
This is the threshold most people miss. If you declared income under the presumptive scheme (Section 44AD for businesses, or 44ADA for professionals) in any of the preceding five years, and you now report profit below the presumptive rate — or a loss — while your total income exceeds the basic exemption limit, a tax audit becomes mandatory even if your turnover is well below Rs 1 crore or Rs 50 lakh. This catches F&O traders and seasonal businesses more often than people expect.
What happens once it applies
Once 44AB applies, a Chartered Accountant must examine your books and file Form 3CA or 3CB (depending on whether your accounts are already audited under another law) along with Form 3CD, the detailed statement of particulars. The report is due by 30 September 2026 for FY 2025-26, ahead of your ITR due by 31 October 2026. Missing this attracts a fee under Section 271B.
Does GST collected on sales count toward my turnover for the 44AB threshold?
No. Turnover for Section 44AB purposes is generally computed on net sales excluding GST and other indirect taxes collected separately and passed through to the government — not on the gross invoice value. Trade discounts and sales returns are also netted off. If your figures are close to the threshold, this distinction can decide whether an audit applies, so it's worth having a CA confirm the exact number rather than reading it off your invoicing software.
This article is for general information only. For your specific situation, consult a practicing CA.
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