Section 44AB(e) applies to a person who has stopped following the presumptive scheme of section 44AD, claims business profit below the deemed amount, and has total income above the maximum amount not chargeable to tax. It is driven by the history of the case, not by this year's turnover.
Facts checked: 9 October 2026, for FY 2025-26 / AY 2026-27 under the Income-tax Act, 1961. For ordinary turnover-based audits, see 44AB(a).
How 44AD(4) creates the trigger
Section 44AD lets an eligible business declare profit at a fixed percentage of turnover (6% for digital receipts, 8% otherwise) and skip detailed books. Section 44AD(4) says that a person who opts out of the scheme, after having used it, cannot use it again for the following five assessment years. For those years the person is treated as not eligible, and 44AB(e) can apply when the person claims lower profit and income is above the basic limit.
Worked example
A trader declared presumptive income under 44AD for several years. In the current year, turnover is ₹70 lakh and the trader reports a profit of 3% instead of the deemed percentage.
| Question | Answer |
|---|---|
| Was 44AD used earlier and now not followed? | Yes |
| Is the claimed profit below the deemed amount? | Yes |
| Is total income above the maximum amount not chargeable to tax? | Yes, in this case |
| 44AB(e) | Applies, audit required |
Turnover of ₹70 lakh is below ₹1 crore, so 44AB(a) would not catch this case.
The history table to keep
Build one table for every presumptive client. For each assessment year, record turnover, section used, income declared and return acknowledgement number. A client who says "we never had an audit" does not answer the 44AD(4) question. The returns do.
- A loss in the current year does not decide the clause. Test the conditions in the statute.
- A new client's earlier years may have been filed by someone else. Pull the returns from the portal.
Record the clause in Form 3CD Clause 8 and keep the history table in the working papers. For the other four clauses, see which 44AB clause applies. The AY 2026-27 report date is 21 October 2026; see the due date note.
Frequently asked questions
Does every business with a loss need an audit under 44AB(e)?
No. The test is the 44AD(4) history plus the income condition, not the loss alone.
How long does the opt-out restriction last?
Five assessment years following the year of the opt-out, under 44AD(4).
Is 44AB(e) the same as 44AB(c)?
No. Clause (c) covers 44AE, 44BB and 44BBB. See 44AB(c).
Read the complete guide to section 44AB.
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