Section 44AB of the Income Tax Act requires certain taxpayers to get their accounts audited by a Chartered Accountant before filing their return. Whether it applies to you depends on your turnover, your profession, and whether you have opted for presumptive taxation.
The Basic Thresholds
For businesses, a tax audit is required once turnover exceeds ₹1 crore in a financial year — but that limit rises to ₹10 crore if at least 95% of your total receipts and payments are made digitally (bank transfers, UPI, cheques rather than cash). For professionals, the base threshold is gross receipts above ₹50 lakh, rising to ₹75 lakh under the same 95% digital condition.
How Presumptive Taxation Changes the Calculation
Businesses using Section 44AD can declare presumptive profit (8% of turnover, or 6% for digital receipts) on turnover up to ₹2 crore (₹3 crore with the digital condition) without a full audit. But if you declare profit below the presumptive rate and your total income exceeds the basic exemption limit, a tax audit becomes mandatory. The same logic applies to professionals under Section 44ADA, where declaring less than 50% profit while your income exceeds the exemption limit triggers an audit requirement.
Opting Out Has Consequences
If you use presumptive taxation and later opt out within the five-year lock-in period, and your income is taxable, a tax audit is required for that year and you become ineligible to use the presumptive scheme again for the following five years.
What Happens If You Skip a Required Audit
Failing to get a mandatory tax audit done can attract a penalty under Section 271B of 0.5% of turnover or gross receipts, up to a maximum of ₹1,50,000 — unless you can demonstrate reasonable cause for the failure, which the tax department evaluates case by case and does not grant automatically.
The Deadline Is Earlier Than You Think
Taxpayers subject to a tax audit typically have until 31 October to file their return, later than the standard deadline for non-audit cases, but the audit report itself needs to be finalised before that filing happens — which means the underlying books need to be ready well before October, not the week of.
These thresholds are revised periodically through the annual Budget, so always confirm the applicable limit for the current assessment year before assuming your business is or is not covered.