Section 44AB is now Section 63 of the Income-tax Act, 2025. Here’s exactly who needs a Tax Audit for AY 2026-27 — turnover thresholds, the 5% digital transaction test, and every presumptive-taxation trigger.
What Changed Under IT Act 2025
Section 44AB of the Income-tax Act, 1961 — the provision mandating a Tax Audit once turnover or gross receipts cross specified thresholds — has been renumbered as Section 63 under the Income-tax Act, 2025, with the presumptive taxation provisions correspondingly placed under the new Section 58. The substantive rule is unchanged; only the section number, and eventually the reporting form, changes.
Since AY 2026-27 (FY 2025-26) relates to a tax year beginning before 1 April 2026, Tax Audit reports for this year continue to be governed by the old Section 44AB and filed using the existing Forms 3CA, 3CB, and 3CD. The new Section 63 framework, with Form No. 26 replacing these forms, applies from Tax Year 2026-27 onward.
Turnover Limits — Business
| Condition | Turnover Threshold | Tax Audit Required? |
|---|---|---|
| Cash receipts and cash payments each ≤ 5% of total transactions | Up to ₹10 Crore | Not required |
| Cash receipts and cash payments each ≤ 5% of total transactions | Above ₹10 Crore | Required |
| Cash receipts or cash payments exceed 5% of total transactions | Above ₹1 Crore | Required |
| Cash receipts or cash payments exceed 5% of total transactions | Up to ₹1 Crore | Not required (unless presumptive scheme conditions apply) |
The 5% cash test applies to both receipts and payments — separately
Both conditions must be independently satisfied to access the enhanced ₹10 crore threshold. A business with 3% cash receipts but 7% cash payments does not qualify for the enhanced limit and reverts to the ₹1 crore threshold — a detail that trips up many otherwise well-run digital-first businesses.
Gross Receipts Limits — Profession
No enhanced digital threshold for professionals
Tax Audit is mandatory for a profession once gross receipts exceed ₹50 lakh in a financial year — regardless of the proportion of digital transactions. The ₹10 crore enhanced business threshold does not extend to professionals under any circumstances.
Who counts as a “profession”
Legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, and similarly notified professions fall under this category — distinct from a trading or manufacturing “business” for threshold purposes.
Presumptive Taxation Triggers
Tax Audit can also become mandatory below the standard thresholds where a taxpayer opts into — or exits — the presumptive taxation schemes under Sections 44AD and 44ADA.
| Scheme | Threshold | Audit Trigger |
|---|---|---|
| 44AD — Presumptive Business | Turnover ≤ ₹2 Crore (₹3 Crore if ≤5% cash) | Profit declared below the 6%/8% presumptive rate, where the taxpayer had opted for the scheme in an earlier year — audit becomes mandatory, and the taxpayer is barred from the scheme for the next 5 years |
| 44ADA — Presumptive Profession | Gross receipts ≤ ₹50 Lakh (₹75 Lakh if ≤5% cash) | Profit declared below 50% of gross receipts and total income exceeds the basic exemption limit — audit becomes mandatory |
The five-year lock-out under Section 44AD(5)
A business taxpayer who opts out of Section 44AD by declaring profit below the presumptive rate cannot re-enter the scheme for five subsequent assessment years — and is required to maintain books and undergo Tax Audit for each of those years if total income exceeds the basic exemption limit.
Worked Examples
E-commerce apparel business, ₹2.7 Crore turnover, 1.2% cash receipts
Cash receipts are within the 5% limit, so the enhanced ₹3 crore threshold under Section 44AD applies. Turnover of ₹2.7 crore is within that limit, and if the taxpayer is an eligible resident individual in an eligible business declaring the presumptive rate, no Tax Audit is required.
Trading business, ₹4.2 Crore turnover, cash payments above 5%
Even though cash receipts are within 5%, cash payments exceeding 5% means both conditions for the enhanced threshold are not satisfied. Turnover of ₹4.2 crore exceeds the base ₹1 crore threshold, so Tax Audit under Section 44AB(a) is required.
Practising Chartered Accountant, ₹42 lakh gross receipts, actual profit below 50%
Gross receipts are below the ₹50 lakh threshold, so audit isn’t triggered by the base limit alone. But if the CA had opted for Section 44ADA presumptive taxation and now declares profit below 50% of receipts with total income above the basic exemption limit, Tax Audit becomes mandatory despite the low turnover.
Due Dates & Penalty
| Item | Detail |
|---|---|
| Tax Audit Report (Form 3CA/3CB + 3CD) due date | 30 September 2026 (AY 2026-27) |
| ITR filing due date where audit applies | 31 October 2026 |
| Transfer pricing cases (Form 3CEB applicable) | 31 October 2026 (audit report); return by 30 November 2026 |
| Penalty for default — Section 271B | 0.5% of turnover/receipts, capped at ₹1,50,000 |
Penalty under Section 271B is not automatic — it can be waived where the taxpayer demonstrates reasonable cause for the delay, such as a bona fide dispute over turnover computation or circumstances genuinely beyond their control.
Common Questions
Does an entity already audited under the Companies Act still need a separate Tax Audit?
Yes. A Tax Audit under Section 44AB is a distinct statutory requirement from a Statutory Audit under the Companies Act — completing one does not exempt an entity from the other where the applicable threshold is crossed.
Is turnover computed GSTIN-wise or PAN-wise for the ₹1 crore/₹10 crore threshold?
Tax Audit thresholds under Section 44AB are computed with reference to the taxpayer’s business or profession as a whole for income tax purposes — generally on a PAN basis for the relevant business — not GSTIN-wise as under GST law.
Does the “turnover” definition include GST collected?
The Income Tax Act does not explicitly define turnover for Section 44AB purposes; the ICAI’s Guidance Note is the reference point most practitioners follow, and GST collected on behalf of the government is generally excluded from turnover computation where accounted for separately.
What if a business crosses ₹1 crore mid-year but stays under ₹10 crore with low cash transactions?
If both the cash-receipts and cash-payments conditions are independently met (each ≤5% of total transactions) for the full financial year, the enhanced ₹10 crore threshold applies and Tax Audit is not required merely for exceeding ₹1 crore.