Is Tax Audit under Section 44AB Applicable to You?
Tax audit is one of the most misunderstood compliance questions because the answer depends on four things at once: turnover, how much of it is in cash, whether you use the presumptive scheme, and the profit you declare. Get it wrong and the penalty under section 271B is 0.5% of turnover up to ₹1.5 lakh, besides a defective-return notice. This checker walks through the statutory tests in order and gives a clear yes/no with reasons.
The tests applied
- Business – 44AB(a): audit if turnover exceeds ₹1 crore. The limit becomes ₹10 crore when cash receipts are 5% or less of total receipts and cash payments are 5% or less of total payments.
- Profession – 44AB(b): audit if gross receipts exceed ₹50 lakh. The 5% cash relaxation does not apply here.
- Presumptive business – 44AD: available up to ₹2 crore turnover (₹3 crore if cash receipts are 5% or less) for resident individuals, HUFs and partnership firms, declaring at least 8% profit (6% on digital receipts). If you declare less than the deemed rate and your income exceeds the basic exemption limit, books and audit become mandatory under 44AD(5).
- Five-year lock-in – 44AD(4): once you opt out of 44AD after having used it, you cannot re-enter for five years, and audit applies in each such year where income exceeds the exemption limit.
- Presumptive profession – 44ADA: up to ₹50 lakh (₹75 lakh if cash receipts are 5% or less), deemed profit 50%; declaring less with income above the exemption limit triggers audit.
Worked example
A proprietor has ₹2.5 crore turnover, 3% cash receipts and 4% cash payments, and declares 8% profit under 44AD. Because cash receipts are within 5%, the 44AD limit is ₹3 crore, so the scheme is available and the declared profit meets the deemed rate – no audit. If the same business had 9% cash receipts, the 44AD limit would fall to ₹2 crore; the turnover exceeds it, and since the ₹10 crore 44AB limit also needs both cash tests to pass, the applicable limit is ₹1 crore – audit required.
Due dates and consequences
When audit applies, Form 3CB-3CD (or 3CA-3CD for entities audited under another law) must be uploaded by 30 September and the return filed by 31 October. Turnover for F&O trading is the absolute sum of profits and losses per ICAI guidance. The checker does not cover sections 44AE, 44B or 44BB; confirm borderline cases with your chartered accountant.
Frequently Asked Questions
What is the tax audit turnover limit for business?
₹1 crore, increased to ₹10 crore when cash receipts and cash payments are each not more than 5% of the respective totals.
Is tax audit compulsory if profit is below 8% under 44AD?
Only if you have declared presumptive income under 44AD in any of the preceding five years (or wish to opt out) and your total income exceeds the basic exemption limit.
Does the ₹10 crore limit apply to professionals?
No. For specified professions the audit limit is gross receipts of ₹50 lakh regardless of the cash percentage.
What is the 44ADA limit for professionals?
₹50 lakh of gross receipts, or ₹75 lakh if cash receipts do not exceed 5% of total receipts, with deemed profit of 50%.
What is the penalty for not getting a tax audit done?
Section 271B: 0.5% of turnover or gross receipts, subject to a maximum of ₹1,50,000, unless reasonable cause is shown.
Disclaimer: This tool is for general information and estimation only. Tax rates and rules change — verify with official sources or a professional before acting. Read full disclaimer.