University · Calculators

Tax Audit Applicability — Sec 44AB Checker.

The ₹1 crore / ₹10 crore / ₹50 lakh / ₹75 lakh limits, the two 5%-cash tests, and the presumptive-scheme traps under 44AD(4) and 44ADA(4) — answered for one client at a time, with the applicable form and the Sec 271B exposure if missed.

Inputs

Nature of activity

Turnover / gross receipts (₹ crore)

Limits: ₹1 Cr, or ₹10 Cr where both cash tests pass

Cash receipts ≤ 5% of total receipts?

Cash payments ≤ 5% of total payments?

Cheques/DDs that are not account-payee count as cash for both tests.

Opted presumptive taxation (Sec 44AD)?

Accounts audited under another law (company / co-op)?

Decides Form 3CA vs 3CB if audit applies.

Result

Tax audit required?✗ No

Report form—

Why no audit

Turnover ₹3.5 Cr is within the enhanced ₹10 Cr limit (≤5% cash both ways) — no audit under 44AB(a).

The limits, and the traps around them.

Sec 44AB has grown four moving parts: the base limits (₹1 crore business, ₹50 lakh profession), the digital-economy enhancements (₹10 crore where cash receipts AND payments are each ≤5%; ₹75 lakh where a professional’s cash receipts are ≤5%), the presumptive ceilings (₹2/₹3 crore for 44AD, ₹50/₹75 lakh for 44ADA), and the opt-out traps — declare below the deemed rate with income above the exemption and the audit becomes compulsory regardless of turnover.

3CA vs 3CB vs 3CD explained Form 3CD template

How Section 44AB applicability works

For business, Sec 44AB(a) requires audit where total sales, turnover or gross receipts exceed ₹1 crore. The proviso lifts the limit to ₹10 crore where aggregate cash receipts AND aggregate cash payments each do not exceed 5% of total receipts/payments — and cheques or drafts that are not account-payee are counted as cash for both tests.

For profession, Sec 44AB(b) requires audit where gross receipts exceed ₹50 lakh — enhanced to ₹75 lakh by the Finance Act 2023 where cash receipts do not exceed 5%.

The presumptive schemes create their own triggers: an assessee who opted for Sec 44AD and then declares profit below the 8%/6% deemed rate (with total income above the basic exemption) must get audited under Sec 44AB(e) read with 44AD(4); a professional declaring below the 44ADA 50% rate is caught by Sec 44AB(d). The audit report is Form 3CA (accounts already audited under another law) or Form 3CB (others), each with the Form 3CD statement of particulars.

Worked example — the ₹10 crore limit saving an audit

A trading proprietorship has turnover of ₹7.2 crore in FY 2025-26. All sales are collected by bank transfer or account-payee instruments; supplier payments are 2.8% cash (labour and cartage).

Inputs

Turnover₹7.2 Cr

Cash receipts0% — ≤5% test passed

Cash payments2.8% — ≤5% test passed

Applicable limit₹10 Cr (both tests passed)

Output

Tax audit u/s 44AB(a)Not required

If cash payments were 6%Limit falls to ₹1 Cr → audit required

Form if required3CB + 3CD (proprietorship)

Sec 271B exposure₹1.5 L (0.5% capped)

Both 5% tests pass, so the ₹10 crore limit applies and ₹7.2 crore stays inside it. The trap: the tests are independent — 0% cash receipts cannot rescue 6% cash payments. One test failing collapses the limit to ₹1 crore and the audit applies.

Common mistakes

Treating the two 5% tests as one

The ₹10 crore limit needs cash receipts ≤5% AND cash payments ≤5% — independently. Firms routinely check receipts (digital collections are common) and forget the payments side, where cash wages, freight and site expenses sit.

Non-account-payee cheques counted as digital

The provisos deem receipts/payments by cheque or draft that is NOT account-payee to be cash for the 5% tests. A bearer-cheque habit can silently fail the test.

Missing the 44AD(4) five-year lock

Opting out of 44AD (declaring lower profit) after having opted in bars re-entry for five assessment years and — with income above the exemption — compels audit u/s 44AB(e). The audit obligation follows the opt-out even at low turnover.

Using turnover instead of gross receipts for professionals

Professionals are tested on gross receipts against ₹50/₹75 lakh — not the business limits. A doctor-run pharmacy needs the split: pharmacy turnover against business limits, consultation receipts against profession limits.

Assuming F&O turnover equals contract value

For derivatives, turnover for 44AB is computed from absolute profits/losses (plus premium on options sold, per ICAI guidance) — not the notional contract value. Many demat statements mislead here in both directions.

Frequently asked questions

What is the tax audit limit for FY 2025-26?+

Business: ₹1 crore, enhanced to ₹10 crore where cash receipts and cash payments are each ≤5% of the respective totals. Profession: ₹50 lakh, enhanced to ₹75 lakh where cash receipts are ≤5%. The presumptive ceilings are separate: ₹2 crore (₹3 crore at ≤5% cash) for 44AD, ₹50 lakh (₹75 lakh) for 44ADA.

Is tax audit required if I opt for presumptive taxation?+

Not while you declare at or above the deemed rate within the ceiling. The audit triggers when you declare below the deemed profit rate with total income above the basic exemption — Sec 44AB(e) for business (via 44AD(4)) and 44AB(d) for profession (via 44ADA(4)).

What is the penalty for not doing a tax audit?+

Sec 271B: 0.5% of turnover or gross receipts, capped at ₹1,50,000, unless reasonable cause is shown (Sec 273B). It applies to failure to get audited and to failure to furnish the report by the specified date.

Which form applies — 3CA or 3CB?+

Form 3CA where the accounts are already audited under any other law (companies under the Companies Act, co-operatives under their Acts); Form 3CB where they are not (proprietorships, most firms and LLPs). Form 3CD is annexed in both cases.

What is the due date for the tax audit report?+

The specified date — one month before the Sec 139(1) return due date, ordinarily 30 September. CBDT extends it in some years; check the current notification.

Authoritative sources

Section 44AB, Income-tax Act 1961 + ICAI Guidance Note on Tax Audit — Limits reflect the Finance Act 2020 (₹10 Cr proviso) and Finance Act 2023 (₹3 Cr / ₹75 L presumptive ceilings) positions. Verify the current year’s Finance Act before concluding borderline cases.

Always confirm against the latest version of the source. Regulations evolve and amendments are common.

Related calculators

3CA vs 3CB vs 3CD →Sec 44AA books-of-account checker →Tax-audit ceiling (60/partner) →Form 3CD template →269SS/T cash checker →

Share this tool

Last reviewed: 2026-07-18 · For informational purposes only — not professional advice.