A tax audit is applicable when any one of the five clauses of section 44AB is met for the year: business turnover above ₹1 crore (₹10 crore with the cash test), professional receipts above ₹50 lakh, or one of three income-based triggers for presumptive-scheme cases. Meeting any one clause is enough.
Facts checked: 9 October 2026, for FY 2025-26 / AY 2026-27 under the Income-tax Act, 1961.
The five-clause test
| Clause | Applies to | Trigger |
|---|---|---|
| (a) | Business | Turnover above ₹1 crore; ₹10 crore if cash receipts and cash payments are each ≤ 5% |
| (b) | Profession | Gross receipts above ₹50 lakh |
| (c) | Section 44AE, 44BB, 44BBB cases | Income declared below the deemed profit |
| (d) | Section 44ADA professionals | Income below the deemed amount and total income above the basic exemption limit |
| (e) | Person who opted out of 44AD | Income below the deemed profit, with total income above the basic exemption limit, within the five-year lock-in under 44AD(4) |
Detail on each: (a), (b), (c), (d), (e).
Worked example
A consultant earned ₹62 lakh in FY 2025-26 and also has a small trading business with ₹40 lakh of turnover.
- Profession: ₹62 lakh is above ₹50 lakh, so 44AB(b) applies.
- Business: ₹40 lakh is below ₹1 crore, so 44AB(a) does not apply on its own.
- Result: tax audit is applicable. The report covers the books of both the profession and the business, in the prescribed forms.
Applicability checklist
- Separate business and profession receipts.
- Compute turnover and the cash receipt and payment percentages.
- Check whether the client uses a presumptive scheme (44AD, 44ADA, 44AE) and whether income was declared below the deemed amount.
- Check the five-year lock-in if the client left 44AD in an earlier year.
- Check whether the accounts are audited under another law; see the third proviso.
- Record the clause in Form 3CD Clause 8.
Common mistakes
- Treating a low profit as a reason for no audit. The limits are on turnover or receipts, not profit.
- Ignoring the cash test when claiming the ₹10 crore limit.
- Forgetting a client who left a presumptive scheme in an earlier year.
The Section 44AB applicability checker runs these tests in one pass. For the limits alone see the tax audit limit for AY 2026-27; for the meaning and penalty see what is an income tax audit.
Frequently asked questions
Is tax audit applicable if turnover is exactly ₹1 crore?
The test is "exceeds" ₹1 crore, so turnover of exactly ₹1 crore does not trigger 44AB(a). Check the other clauses before concluding.
Is tax audit applicable to a salaried person?
Not for salary. It applies if the person also carries on a business or profession above the limits.
Is tax audit applicable to a loss-making business?
Yes, if turnover is above the limit. Losses do not exempt the audit.
What if tax audit was applicable but not done?
Section 271B can apply, subject to reasonable cause under section 273B.
Read the complete guide to section 44AB for the full process.
Statutory facts on this page are checked against their sources, and the page says where it relied on secondary reporting. How we verify · Report an error