A SaaS company in Bengaluru closed FY 2025-26 with ₹94 lakh in revenue. The founder told his accountant there was no tax audit this year — turnover was under the ₹1 crore line. In October he received an intimation. The company had also booked ₹18 lakh of income from a one-time IP licensing deal that sat in "other income," and it had declared a net loss while its books showed profits below the presumptive threshold it had never opted out of properly. Two separate limbs of Section 44AB were triggered. The report was filed 74 days late, and Section 271B penalty proceedings followed.

The ₹1 crore figure is the most quoted and least understood number in Indian direct tax compliance. It is not one threshold. It is one of five, and for most private limited companies it is not even the one that applies.

What the law actually requires

Section 44AB of the Income Tax Act, 1961 requires certain assessees to get their accounts audited by a Chartered Accountant and furnish the report electronically before the specified date. For a private limited company, the audit under Section 44AB is in addition to the statutory audit under Section 139 of the Companies Act, 2013. These are separate obligations with separate reports, separate formats, and separate penalties. A clean statutory audit report does not discharge the Section 44AB requirement.

The threshold limbs are these:

Clause (a) — business. Total sales, turnover or gross receipts exceeding ₹1 crore in the previous year.

The ₹10 crore proviso. The Finance Act 2021 inserted a proviso raising the clause (a) threshold to ₹10 crore where both of the following are satisfied: aggregate cash receipts during the year do not exceed 5% of total receipts, and aggregate cash payments do not exceed 5% of total payments. Note that a payment by cheque or bank draft that is not account-payee is treated as a cash payment for this test. This is the threshold most digital-first private limited companies actually sit under — and it is the one most commonly claimed without the underlying 5% test being documented.

Clause (b) — profession. Gross receipts exceeding ₹50 lakh in the previous year. A company rendering professional services as defined in Section 44AA(1) falls here, not under clause (a).

Clause (d) — presumptive profession. Where an assessee covered by Section 44ADA declares profits lower than 50% of gross receipts and total income exceeds the basic exemption limit.

Clause (e) — presumptive business exit. Where an assessee covered by Section 44AD(4) — having opted out of the presumptive regime after previously opting in — declares income below the presumptive rate and has total income above the exemption limit. This limb catches companies that used presumptive taxation in an earlier year and then reverted.

The forms. Rule 6G prescribes two routes. Form 3CA is used where the accounts are already required to be audited under any other law — which is the case for every private limited company, because Section 139 of the Companies Act mandates a statutory audit regardless of turnover. Form 3CB applies only where no other law requires an audit. In practice, a Pvt Ltd files Form 3CA together with Form 3CD. If your CA has filed Form 3CB for your company, that is a formatting error worth correcting.

Form 3CD is the statement of particulars — currently 44 clauses across Part A (clauses 1–8A, identification) and Part B (clauses 9–44, substantive disclosures). The clauses that generate the most departmental follow-up are Clause 21 (amounts debited to P&L that are inadmissible), Clause 22 (interest inadmissible under Section 23 of the MSMED Act, 2006), Clause 26 (sums covered by Section 43B), Clause 31 (loans and deposits under Sections 269SS and 269T), Clause 34 (TDS compliance and default), and Clause 44 (break-up of total expenditure by GST-registered and unregistered entities).

Due dates. For FY 2025-26 (AY 2026-27), the specified date for furnishing the Form 3CA-3CD audit report is 30 September 2026. The ITR-6 for an audited company is due 31 October 2026. Where the company has international transactions or specified domestic transactions requiring a Form 3CEB under Section 92E, the ITR due date extends to 30 November 2026, and the Form 3CEB itself is due 31 October 2026. CBDT has extended the 30 September date in several recent years, but extensions are discretionary, announced late, and cannot be relied upon in planning.

Practical implications

Section 271B penalty. Failure to get accounts audited or to furnish the report by the specified date attracts a penalty of 0.5% of total sales, turnover or gross receipts, capped at ₹1,50,000. On ₹8 crore of turnover the penalty is the full ₹1.5 lakh. Section 273B provides relief where the assessee proves reasonable cause, but "our CA was busy" and "the portal was slow on the last day" have both failed that test repeatedly before appellate authorities.

The ITR becomes defective. Under Section 139(9), an ITR-6 filed by a company liable to audit without the corresponding audit report on record can be treated as defective. You get 15 days to cure it. If you do not, the return is treated as never having been filed — which means the loss you were carrying forward under Section 72 is gone, because Section 80 denies carry-forward of business loss where the return is not filed within the Section 139(1) due date.

Interest under 234A. A late ITR triggers 1% per month simple interest on unpaid self-assessment tax from the due date to the filing date. On a ₹40 lakh tax liability filed three months late, that is ₹1.2 lakh in interest — on top of the 271B penalty.

Scrutiny selection. Form 3CD is a machine-readable disclosure schedule. The CASS (Computer Aided Scrutiny Selection) system compares Clause 34 TDS data against the TRACES 26AS reconciliation, Clause 44 expenditure against GSTR-3B outward and inward supplies, and Clause 21 disallowances against the computation in the ITR. Mismatches between what your Form 3CD says and what your GST returns say are one of the most reliable scrutiny triggers currently in operation.

The MCA21 v3 interaction. MCA21 v3 links the AOC-4 financial statements to the ROC filing history and flags companies whose declared turnover in AOC-4 is inconsistent with prior-year filings or with the auditor's report. A company that files an AOC-4 showing ₹12 crore turnover while having filed no tax audit report has created a visible cross-portal inconsistency. The two systems do not formally exchange data, but the discrepancy is available to any officer who looks — and increasingly, to automated risk-scoring.

Step-by-step: what to do

Compute turnover on the ICAI Guidance Note basis, not the P&L top line. Exclude GST collected where it was credited to a separate liability account. Include the full value of goods sold on approval that were subsequently accepted. Exclude sale proceeds of fixed assets. For a company with derivative or forex transactions, note that turnover for 44AB purposes is computed on absolute profit-and-loss, not contract value.
Run the 5% cash test before claiming the ₹10 crore threshold. Extract total receipts and total payments for the year from the cash flow statement. Compute cash receipts as a percentage of total receipts and cash payments as a percentage of total payments. Both must be at or below 5%. Save the working paper. If you are ever asked to justify why no audit was done at ₹6 crore turnover, this schedule is your answer.
Check clauses (d) and (e) separately. These do not depend on turnover at all. If the company ever declared income under Section 44AD or 44ADA and has since reverted, or is declaring below-presumptive profits, the audit is required regardless of the ₹1 crore or ₹10 crore position.
Appoint the tax auditor by board resolution and get the CA's UDIN. Every Form 3CD must carry a Unique Document Identification Number generated on the ICAI portal. A report without a valid UDIN is not a valid report. Verify the UDIN yourself at udin.icai.org before accepting the signed report.
Reconcile before the CA starts, not after. Pull 26AS, AIS, TIS, GSTR-3B annual summary, and GSTR-9 (if applicable). Reconcile them against the books. Every unexplained difference at this stage becomes a Form 3CD disclosure, and every Form 3CD disclosure is a scrutiny data point.
File Form 3CA-3CD on the e-filing portal before the ITR. The CA uploads the report from their own login; the company then accepts it from the assessee login. The acceptance step is what completes the filing. A report uploaded by the CA and never accepted by the company is not furnished, and Section 271B applies as though nothing was filed. This is the single most common avoidable failure in the entire process.
Then file ITR-6, quoting the audit report acknowledgement number and the auditor's membership number in the relevant schedule.

FAQ

Does a company with zero revenue need a tax audit?
Not under clause (a) or (b) — the turnover thresholds are not crossed. But the Companies Act statutory audit under Section 139 is still mandatory, and Form AOC-4 and MGT-7A still have to be filed. Dormancy does not suspend either.

Can the same CA do the statutory audit and the tax audit?
Yes. There is no bar under the Income Tax Act or the Companies Act on the statutory auditor also acting as tax auditor. ICAI limits a member to 60 tax audits per financial year, but that is a limit on the CA, not on your company.

We crossed ₹1 crore but our cash receipts and payments were under 5%. Do we still need an audit?
No, provided both cash tests are satisfied and the turnover is under ₹10 crore. But document the computation contemporaneously. The exemption is a factual claim you must be able to substantiate on demand.

What if the audit report is filed on time but contains an error?
Rule 6G(3) permits a revised Form 3CD where the accounts are revised, or where recalculation is required because of a retrospective legal change or a disallowance under Section 40 or 43B. The revised report must be filed before the end of the relevant assessment year and must state the reason for revision.

Closing

The ₹1 crore number is not the test. The five limbs of Section 44AB, the 5% cash proviso, and the acceptance step on the e-filing portal are the tests — and each one has caught a company that believed it was compliant.

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