Tax Audit under Section 44AB: Applicability Limits FY 2025-26

A tax audit under Section 44AB (Section 63 of the Income-tax Act, 2025) is an examination of your books of account by a chartered accountant, done to certify that reported turnover and deductions match the records. It applies where your business or professional scale crosses statutory limits. This guide sets out the thresholds for FY 2025-26 (AY 2026-27), the presumptive-scheme trap and the due dates.

New law note: From 1 April 2026, the Income-tax Act, 2025 replaces the Income-tax Act, 1961. Returns for FY 2025-26 (AY 2026-27) are still filed under the 1961 Act with ITR-1 to ITR-7, so the section numbers used in this guide remain the ones for that filing. From tax year 2026-27, provisions carry new numbers (for example, Section 80C becomes Section 123 and Section 87A becomes Section 156) and key forms change (Form 16 becomes Form 130 and Form 26AS becomes Form 168), while proceedings for earlier years continue under the 1961 Act. See the complete mapping in our Income-tax Act 2025 section and form mapping guide.

When is a tax audit compulsory for FY 2025-26?

The audit limits depend on how much of your business runs in cash. The headline thresholds for the year are:

The ₹10 crore window rewards businesses that are almost fully digital — every receipt and payment must pass through banking channels for the enhanced limit to open. Miss the 5% test by even one rupee and the ₹2 crore limit applies.

The Section 44AD (Section 58 of the Income-tax Act, 2025) opt-out trap

Taxpayers using the presumptive scheme must watch one more trigger. If you declare profits under Section 44AD lower than the presumed 8% or 6% of turnover, and your total income exceeds the basic exemption limit, then books must be maintained and audited — and you are barred from using the presumptive scheme for the next five assessment years. The same logic applies to professionals who declare under 50% of receipts under Section 44ADA (Section 58 of the Income-tax Act, 2025).

This is the most common audit surprise for small businesses. If margins are genuinely thin, evaluate the cost of a five-year audit obligation against the tax saved before opting out.

Due dates: audit report and ITR

For FY 2025-26 (AY 2026-27), the audit report must be obtained and filed by 30 September 2026, and the return for audited cases is due by 31 October 2026. The ITR for audited cases cannot be filed before the audit report is uploaded and accepted, which is why the two deadlines sit a month apart. The late-filing history is worth knowing: the CBDT extended the FY 2024-25 (AY 2025-26) audit report deadline to 31 October 2025 and the ITR deadline to 30 November 2025. Extensions depend on year-specific notifications, so check the latest CBDT announcement rather than assuming the calendar dates are final.

Forms and filing mechanics

• The auditor files Form 3CA plus 3CD where the entity is already audited under another law, or Form 3CB plus 3CD where tax audit is the only audit.
• Form 3CD carries around forty clauses — related party transactions, depreciation, GST turnover reconciliation, loans and deposits in cash, and disallowances.
• The audit report is e-filed on the taxpayer’s account after the chartered accountant uploads it, using a valid UDIN generated from the ICAI portal.
• The taxpayer then files the ITR referencing the accepted audit report.

Failing to get audited invites a penalty under Section 271B computed on turnover, aside from the loss of credibility with lenders and tenders that an audit trail provides. Reasonable cause can shield a genuine defaulter, but the safe course is to engage the auditor early in September rather than in the last week.

Books of account the audit relies on

Section 44AA prescribes which books must be kept once these limits are crossed — cash book, ledger, sales and purchase bills, and supporting vouchers. The tax audit examines those very records, so clean books through the year are cheaper than a September reconstruction. Businesses that cross the limits mid-year should start maintaining books from the month the threshold is breached.

What the auditor actually checks

• Turnover reconciliation between books, GST returns and the ITR.
• Cash transactions — loans, deposits and payments above the statutory cash limits.
• Depreciation claims and capitalisation of assets.
• Related party dealings and specified domestic transactions.
• Presumptive income declarations where Sections 44AD or 44ADA were used in earlier years.

Key takeaways

• Businesses: audit above ₹2 crore turnover, or ₹10 crore with cash receipts and payments each within 5%.
• Professions: audit above ₹50 lakh receipts, relaxed to ₹75 lakh where receipts are 95% or more digital.
• Opting out of 44AD with lower declared profit and income above the exemption forces books and audit for five years.
• Audit report by 30 September 2026 and ITR by 31 October 2026 for AY 2026-27, subject to CBDT notifications.
• The CA files 3CA/3CB with 3CD online with a UDIN; the taxpayer then files the ITR.

Frequently asked questions

Is tax audit the same as a statutory audit?

No. A statutory audit under company law examines financial statements; a tax audit under Section 44AB examines the tax computation and reporting clauses in Form 3CD. A company may need both.

Who can conduct a tax audit?

Only a chartered accountant within the limits permitted by the ICAI, who uploads the audit report with a UDIN. The taxpayer must authorise the CA on the e-filing portal before filing the ITR.

Can a presumptive taxpayer ever be audited?

Yes. A taxpayer on Section 44AD who declares profit below 8% or 6% with total income above the basic exemption limit must get books audited and loses the scheme for five assessment years.

What is the last date for the tax audit report?

For FY 2025-26, the audit report is due by 30 September 2026. In recent years the CBDT has extended these dates — the AY 2025-26 audit report moved to 31 October 2025 — so watch for current-year notifications.

Where can I get help with audit readiness?

Maintaining GST-book reconciliations through the year is the hard part. An income tax consultant can prepare you for Form 3CD clauses, and the income tax calculator helps test whether opting out of the presumptive scheme actually pays.

Disclaimer: Tax laws change frequently. Verify current rates and deadlines on the official portals (incometax.gov.in, gst.gov.in) or consult a qualified professional before acting.