Tax audit under section 44AB for AY 2026-27: Section 44AB of the Income Tax Act is the foundational provision for tax compliance among businesses and professionals in India, as it mandates a compulsory tax audit once specified financial thresholds are exceeded. In essence, this legal requirement obliges taxpayers whose turnover or gross receipts cross certain limits to have their accounts formally examined and certified by a practicing Chartered Accountant.<\/p>\n
Add informalnewz.com as a Preferred Source<\/p>\n
This audit fulfils a twofold objective: it offers the taxpayer a professional evaluation of their financial position, while also providing the tax authorities with assurance regarding the correctness of the declared income.<\/p>\n
Whether you are a small trader with a turnover of \u20b91.5 crore or a professional earning \u20b960 lakhs, a thorough understanding of the applicability, the detailed turnover limits, including the special concession of \u20b910 crore for transactions conducted largely through digital means, and the critical filing deadlines in September and October is essential to ensure smooth compliance and to avoid penal action under the Act.<\/p>\n
A tax audit is mandatory if total sales, turnover, or gross receipts exceed \u20b91 Crore in a financial year.<\/p>\n
The threshold is raised to \u20b910 Crores provided both of the following conditions are satisfied simultaneously:<\/p>\n
Aggregate cash receipts do not exceed 5% of total receipts.<\/p>\n
Aggregate cash payments do not exceed 5% of total payments.<\/p>\n
Threshold: This scheme is available for turnover up to \u20b92 Crores (or \u20b93 Crores if cash receipts do not exceed 5%).<\/p>\n
Audit Trigger: An audit becomes compulsory if an eligible taxpayer declares profits below the prescribed rate (6% or 8%) and their total income exceeds the basic exemption limit.<\/p>\n
If a taxpayer opts out of the 44AD scheme within five years of having opted in, they are disqualified from using the scheme for the next five consecutive years. During this five-year period, a tax audit is mandatory if their income exceeds the basic exemption limit, irrespective of turnover.
\nProfessionals<\/p>\n
A tax audit is mandatory if gross receipts exceed \u20b950 Lakhs in a financial year.<\/p>\n
Threshold: This scheme is available for professionals with gross receipts up to \u20b950 Lakhs (or \u20b975 Lakhs if cash receipts do not exceed 5%).<\/p>\n
Audit Trigger: An audit becomes compulsory if a professional declares profits below 50% of gross receipts and their total income exceeds the basic exemption limit.<\/p>\n
A tax audit is mandatory if the taxpayer declares income lower than the presumptive limits prescribed under these sections.<\/p>\n