Does your business need a tax audit this year? The Section 44AB test, on your own figures

Short answer: for FY 2025-26, audit applies to a business with turnover above ₹1 crore — or above ₹10 crore where both cash receipts and cash payments are within 5% of the total — and to a profession with receipts above ₹50 lakh. Two presumptive routes bring people in below those limits. The report is due 30 September 2026.

The self-check above runs the test. What follows is what sits behind each question, and the two answers the turnover figure alone gets wrong.

The three routes into audit

Section 44AB is not one test. It is three, and a business can be inside on any of them:

The first two are what people check. The third is what they miss, because it does not depend on turnover at all.

The 5% cash test has two limbs, and both must hold

The ₹10 crore limit is not a general relaxation. It is available only where:

• cash receipts are 5% or less of total receipts, and
• cash payments are 5% or less of total payments.

The second limb is the one that fails. A contractor invoiced entirely by bank transfer passes the receipts test without thinking about it, then settles site labour, transport and small suppliers in cash — and the payments limb fails. The threshold drops back to ₹1 crore, and a ₹2.6 crore business that assumed it was well clear is in audit.

Two details decide real cases:

• A cheque or draft that is not account-payee counts as cash on both limbs. A bearer cheque to a supplier is a cash payment for this purpose, whatever the bank statement shows.
• The question to answer is not "how do my customers pay me". It is "how do I pay everybody else".

What counts as turnover

Four points that move a business across the line:

1. All businesses aggregate. A proprietor running a trading business and a separate agency is tested on the two turnovers added together.
2. Business and profession are tested separately. A doctor with a pharmacy tests the practice against ₹50 lakh and the pharmacy against ₹1 crore, each on its own.
3. GST follows your books. Where sales are recorded inclusive of GST and the tax forms part of turnover in the accounts, it is part of turnover for this test. Where GST is credited straight to a liability account and never touches sales, it is not. The answer is in your own ledger, and for a business near ₹1 crore it can be the whole answer.
4. Trading turnover is not contract value. For F&O and intraday, turnover is the sum of profits and losses taken as positive figures — usually a small fraction of what the broker's statement calls turnover. Using the broker's figure is how traders buy an audit they never needed. See how F&O and intraday turnover is actually computed.

The two routes that ignore the turnover limit

Departing from Section 44AD

If you declared income under Section 44AD in an earlier year, and in any of the five following years you declare profit below the presumptive rate (8%, or 6% for banking-channel receipts), Section 44AD(4) removes you from the scheme for five years. Section 44AB(e) then requires audit where your total income exceeds the basic exemption limit — regardless of turnover.

That is the trap: a thin-margin year, declared honestly at 3%, pulls a ₹70 lakh business into audit. The mechanics and the five-year consequence are in Section 44AD or regular books.

Declaring below 50% as a professional

A professional under Section 44ADA who declares less than 50% of gross receipts as income, with total income above the exemption limit, is in audit under Section 44AB(d). There is no five-year lock-in for professionals, but there is this: the year you go below 50%, you need books and an audit for that year. The decision is worked through in presumptive or books for professionals.

Who is outside it

• A business declaring under Section 44AD at or above the presumptive rate, with turnover up to ₹2 crore, is outside Section 44AB on that business. Between ₹2 crore and the scheme's ₹3 crore ceiling, the two-limb cash test is what keeps you out — check the payments side, not just the receipts.
• A profession within ₹50 lakh declaring at or above 50% under Section 44ADA.
• A business whose turnover is within ₹1 crore and which has never used a presumptive scheme, or has never departed from one.

"Outside" means no report is required. Books may still be required under Section 44AA, and turnover still has to be evidenced — a bank trail is the practical foundation of any position.

A company's statutory audit is not a tax audit

They are different obligations under different statutes. The Companies Act audit asks whether the financial statements are true and fair. The Section 44AB audit reports the particulars income-tax law wants, in Form 3CD. A company above the threshold needs both, and files its tax audit report in Form 3CA because the accounts are already audited under another law. Everyone else files in Form 3CB. Form 3CD accompanies both.

The dates, and what missing them costs

After the auditor uploads the report, you accept it from your own login on the e-filing portal. An uploaded report left unaccepted is not filed, and the date keeps running.

Missing 30 September attracts a penalty under Section 271B of 0.5% of turnover, capped at ₹1,50,000. It is not automatic — Section 273B allows it to be dropped for reasonable cause, which has to be pleaded and evidenced. The larger cost is usually the return: filed after the due date, it cannot carry forward business losses, and for a loss-making year that is frequently worth more than the penalty.

The full calendar, the records that hold an audit up, and the changed shape of the consequence under the 2025 Act are in tax audit season: the dates, and what to have ready.

What to send

If the self-check said audit applies, or you are near a line and not sure:

1. Turnover for the year, from the books — and, separately, GST turnover for the year, so the two can be reconciled before an officer does it.
2. Cash receipts and cash payments, as a share of the totals — including any non-account-payee cheques.
3. Last year's return, and whether it was filed on a presumptive basis.
4. The nature of the activity — business, profession, or both.

From those four, the clause that applies, the form, and whether any of it can still be avoided are settled in one conversation. The audit and assurance page covers the wider position, including statutory and internal audit.

Limits and dates are stated for FY 2025-26 (AY 2026-27) under the Income-tax Act, 1961, and can be varied by the Board. Whether audit applies in a particular case depends on the figures and the nature of the activity, and should be confirmed against them before the position is taken.