Tax Audit under Section 44AB

Tax audit applicability is governed by Section 44AB of the Income Tax Act, 1961.

Business turnover threshold: Every person carrying on business must get accounts audited if total sales, turnover, or gross receipts exceed ₹1 crore in the previous year. This threshold is enhanced to ₹10 crore where cash receipts and cash payments each do not exceed 5% of the total receipts/payments respectively (the "digital transactions" test) — i.e. at least 95% of both receipts and payments are through banking channels/other prescribed electronic modes.

Professional gross receipts threshold: A person carrying on a profession must get accounts audited if gross receipts exceed ₹50 lakh in the previous year, enhanced to ₹75 lakh where the same ≤5% cash-transaction condition is met under the corresponding proviso.

Report and form: The tax audit report is furnished in FORM 3CA (where accounts are audited under another law) or FORM 3CB (in other cases), along with the statement of particulars in FORM 3CD, uploaded electronically by a practising Chartered Accountant.

Due date: The tax audit report must be furnished at least one month before the due date for filing the return of income under Section 139(1) — currently 30 September of the assessment year for non-transfer-pricing cases (AY 2026-27: 30 September 2026).

Penalty for default: Failure to get accounts audited, or to furnish the report, attracts a penalty under Section 271B of one-half percent (0.5%) of turnover/gross receipts, subject to a maximum of ₹1,50,000, unless reasonable cause is shown.

This service determines Section 44AB applicability, applies the digital-transaction thresholds, and manages Form 3CA/3CB-3CD filing.

Tax audit is the audit of a business's accounts under Section 44AB of the Income-tax Act 1961 — the audit required for the businesses and the professions whose turnover or gross receipts cross the prescribed thresholds, conducted by a chartered accountant, and reported in the Form 3CA/3CB and the Form 3CD. The tax audit is the verification of the books against the tax law — the compliance with the presumptive and the disallowance provisions, the deductions, the TDS and the statutory compliance — and its report is the document the tax department reads when it assesses the business.

The tax audit under Section 44AB is the statutory examination of the business's accounts — the turnover threshold that triggers it, the audit by the chartered accountant, and the Form 3CD with its prescribed clauses that verify the compliance — the presumptive positions, the disallowances under Sections 40 and 40A, the depreciation, the TDS and the GST positions, the related party transactions and the other statutory details. The report is the summary of the business's tax compliance, and its clauses are the department's checklist.

The cost of a mishandled tax audit is the finding at the assessment: the disallowances that the report should have identified, the presumptive positions misapplied, the statutory non-compliance that the clauses expose — each an addition with the interest.

This service is for businesses required to get their accounts audited under Section 44AB. We compute the audit requirement, examine the books and the compliance against the Act, prepare the audit report in the Form 3CA/3CB and the Form 3CD with the prescribed clauses, and coordinate with the return filing so the business's tax audit is completed and its positions documented.