Tax Audit Support (Section 44AB)

A tax audit under Section 44AB is an examination of your accounts by a chartered accountant, required when your business or professional activity crosses certain thresholds — or in specific cases like declaring lower profits than the presumptive scheme. The auditor reports in Form 3CA/3CB and the detailed Form 3CD.

The audit is filed before the income tax return, and the ITR due date for audit cases is later (commonly 31 October). Getting it done on time avoids a penalty under Section 271B.

The thresholds themselves did not change when the law was renumbered. For tax year 2026-27 they sit in section 63 of the Income-tax Act, 2025, and the Income Tax Department states plainly that they remain the same as were in the old Act: business turnover or gross receipts above ₹1 crore, raised to ₹10 crore where cash receipts are not more than 5% of receipts and cash payments are not more than 5% of payments; professional gross receipts above ₹50 lakh; and, separately, any case where presumptive income is declared below the deemed profit.

The 5% cash test is the part that decides most borderline cases, and it is two tests, not one. Both limbs have to hold — receipts and payments. Fail either and the ₹10 crore relief disappears entirely and you fall back to the ₹1 crore threshold, which most businesses of that size are far above. It is worth knowing the number before the year ends, not after, because by then the cash mix is fixed.

Which year sits under which Act matters for the citation and the deadline. AY 2026-27 is the income of FY 2025-26 and remains governed by the Income-tax Act, 1961 — its report is due 30 September 2026 on the existing Forms 3CA, 3CB and 3CD, with the return by 31 October 2026. Tax year 2026-27 falls under the 2025 Act, where the report goes on Form No. 26 under the Income-tax Rules, 2026 — a single form merging 3CA, 3CB and 3CD — due 30 September 2027. Section 63(5)(a) fixes the specified date as one month before the return due date, so the two always move together.

Worked example — the 5% test, both ways. Assumptions: resident proprietor, trading business, tax year 2026-27, turnover ₹4,20,00,000. In case A, cash receipts are ₹9,00,000 (2.1% of receipts) and cash payments ₹6,50,000 (1.8% of payments). Both limbs are within 5%, so the threshold is ₹10 crore, turnover of ₹4.2 crore is below it, and no tax audit is required under section 63. In case B everything is identical except that cash receipts are ₹25,00,000 — 5.95% of receipts. That single figure breaks the first limb, the ₹10 crore relief is lost, the threshold reverts to ₹1 crore, and a business at ₹4.2 crore is now firmly inside the audit net. The report would be due 30 September 2027 and the return 31 October 2027. File the report 45 days late and the fee under section 428(c) is ₹1,50,000, because the delay exceeds one month; file it inside a month and it is ₹75,000. Change the cash mix and the whole answer changes, which is exactly why we test it during the year rather than at the audit.

Presumptive taxation and audit are two halves of the same decision. Under section 58, an eligible business may declare presumptive income up to a turnover of ₹2 crore, or ₹3 crore where cash receipts are within 5%, at 6% of banking and online receipts plus 8% of the rest — or actual profit if that is higher. A specified profession may declare up to ₹50 lakh, or ₹75 lakh on the same 5% condition, at 50% of gross receipts. Declare less than the deemed figure and section 63 pulls you into audit anyway, which is the trap behind most unexpected audits. Business ITR filing and freelancer filing both turn on this choice.

Keeping books is a separate obligation from being audited, and it starts much lower. Section 62 requires books where income exceeds ₹1,20,000 or turnover exceeds ₹10 lakh in any one of the three preceding years — ₹2,50,000 and ₹25 lakh respectively for an individual or HUF. Plenty of businesses owe books without owing an audit.

We assess whether a tax audit applies to you, prepare your books and financials, coordinate the audit with a qualified CA, and file the ITR.