Section 44AB Tax Audit — Turnover Limit, Applicability and Exceptions

Section 44AB of the Income Tax Act mandates a tax audit by a Chartered Accountant for taxpayers whose business or professional income exceeds prescribed turnover limits — or who declare lower profit than the presumptive rate under Section 44AD/44ADA. The tax audit report (Forms 3CA/3CB and 3CD) must be filed by September 30 of the assessment year. Here is the complete guide.

Who Must Get a Tax Audit? — Section 44AB Applicability

• Business taxpayer: If total sales/turnover/gross receipts exceed ₹1 crore in a financial year
• Business taxpayer (enhanced limit — digital receipts): If total turnover is between ₹1 crore and ₹10 crore — tax audit is NOT required if cash receipts do not exceed 5% of total receipts AND cash payments do not exceed 5% of total payments. In such cases, effectively the limit becomes ₹10 crore.
• Professional taxpayer: If gross receipts from profession exceed ₹50 lakh in a financial year
• Presumptive income declaration: If a taxpayer covered by Section 44AD or 44ADA declares income lower than the prescribed percentage (8%/6% for business; 50% for profession) — mandatory tax audit regardless of turnover level
• Covered by Section 44AE (transport): If profit declared is lower than prescribed per vehicle amount — mandatory audit

Tax Audit Report — Forms

• Form 3CA: CA's audit report for taxpayers whose accounts are already audited under any other law (e.g., Companies Act audit)
• Form 3CB: CA's audit report for other taxpayers (where accounts are not mandatorily audited under any other law)
• Form 3CD: Statement of particulars — a detailed report with 44 clauses covering income, deductions, expenditures, related party transactions, loans, TDS compliance and more

Due Date

• September 30 of the assessment year (30th September following the close of the financial year)
• This is also the due date for ITR filing for audit cases (taxpayers required to get accounts audited)
• Late filing penalty under Section 271B: 0.5% of turnover — maximum ₹1.5 lakh

Common Points in Form 3CD

• Cash payments above ₹20,000 to single person per day (Section 40A(3) disallowance)
• TDS compliance — defaults and disallowances under Section 40(a)(ia)
• Loans/advances received in cash above ₹20,000 (Section 269SS)
• Repayments of loans in cash above ₹20,000 (Section 269T)

Conclusion

Section 44AB tax audit is a mandatory compliance for larger businesses and professionals — with specific turnover thresholds and the digital receipts exception for businesses below ₹10 crore. SPOTON provides tax audit (Section 44AB), Form 3CD filing and income tax advisory for businesses and professionals in Kerala. Contact us for expert tax audit services.