Tax Audit Under Section 44AB (Updated 2025-26 Guide)

Tax Audit under Section 44AB is one of the most important compliance requirements for businesses and professionals in India.
In FY 2025–26, the Income Tax Department introduced new clarifications on turnover calculation, presumptive scheme rules, and reporting requirements, making it essential to stay updated.

This blog explains everything in a clean, simple, WonderTax-style format.

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⭐ Who Should Read This Guide?

• Business owners, shopkeepers & traders

• Freelancers & professionals

• Small businesses under 44AD/44ADA

• Startups and MSMEs

• Companies, LLPs & partnerships

• Tax consultants, accountants

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: What Is a Tax Audit Under Section 44AB?

A tax audit is a detailed review of:
✔ Books of accounts
✔ Income & expenditure statements
✔ GST reconciliations
✔ Compliance with Income Tax laws

The auditor must furnish the report in Form 3CA/3CB + Form 3CD.

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: Applicability of Tax Audit (Updated FY 2025–26)

Section 44AB applies when your turnover or receipts cross certain limits OR when you opt out of presumptive taxation.

Below is the complete updated matrix:

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: A. Businesses (Trading / Manufacturing / Retail / Wholesale)

1️⃣ If NOT using Presumptive Taxation (44AD)

Tax audit mandatory if turnover exceeds ₹1 crore.

2️⃣ If Digital Transactions ≥ 95%

Audit limit increases to ₹10 crore
(meaning: ≤ 5% cash receipts + ≤ 5% cash payments).

✔ Most modern businesses qualify for this.

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: B. Professionals (44ADA Not Opted)

Professionals must undergo tax audit if:

📌 Gross receipts > ₹50 lakh

This applies to doctors, CAs, lawyers, architects, designers, interior decorators, consultants, influencers etc.

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: C. Businesses Under Presumptive Taxation (44AD)

If you adopt 44AD:

Audit is required when:

1. Turnover ≤ ₹2 crore but you declare income < 6%/8%

   • 6% for digital receipts

   • 8% for cash receipts

2. You opt out of 44AD after using it for any year
   → This triggers a 5-year lockout, and audit is mandatory if income exceeds the basic exemption limit.

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: D. Professionals Under 44ADA

If you declare profit < 50% of gross receipts,
and total income exceeds basic exemption limit → Tax audit mandatory.

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: E. Transporters under 44AE

Audit applies if:

• You declare income below deemed income (₹1,000 per ton per month), and

• Total income > basic exemption limit.

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: Summary Table — Tax Audit Applicability (2025 Updated)

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: How to Calculate Turnover for Tax Audit? (2025 Clarification)

Trading/Manufacturing:

Turnover = Total Sales (Excluding GST if accounted separately)

Speculative Trading:

Turnover = Absolute profit/loss

F&O / Intraday (Important for 2025 Filers)

✔ Turnover = Absolute value of profit/loss
✔ GST not counted
✔ High-frequency traders must track each trade

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: Forms Applicable for Tax Audit (2025)

Form 3CA

For businesses already audited under another Act (Companies Act, LLP Act).

Form 3CB

For businesses NOT audited under any other act.

Form 3CD (Main Report)

Contains 44 clauses including:
✔ Related party transactions
✔ Depreciation
✔ GST reconciliations
✔ TDS compliance
✔ Cash transactions
✔ Loan disclosures

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: Due Date for Tax Audit (FY 2025–26)

📌 Tax Audit Report Due Date: 30 September 2026
📌 ITR Due Date for audited taxpayers: 31 October 2026

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: Penalties for Non-Compliance (Updated 2025)

Under Section 271B:

Penalty = LOWER of:

• ₹1,50,000, OR

• 0.5% of turnover

If turnover = ₹4 Cr → Penalty = ₹2,00,000
Lower of the two = ₹1,50,000

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: Benefits of Tax Audit (Often Missed by Businesses)

✔ Ensures financial accuracy
✔ Higher loan eligibility
✔ Prevents scrutiny notices
✔ Higher reliability for investors
✔ Strong GST-ITR reconciliation
✔ Clean books = easier due diligence for startups

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: Practical Examples (Updated 2025)

Example 1: Trader with ₹3.8 crore turnover, 98% digital receipts

Tax audit NOT required (limit = ₹10 crore)

Example 2: Doctor with ₹62 lakh professional receipts

Tax audit mandatory.

Example 3: Small shopkeeper under 44AD declaring 3% profit

Tax audit mandatory since <6%.

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: WonderTax Can Help With Your Tax Audit

We manage:

• Books finalization

• 3CD clauses

• GST-ITR reconciliation

• Audit-ready documentation

• Full support till filing

👉 Explore professional audit services:
https://wondertax.in/contact-us/services

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: FAQs — Tax Audit 2025

Q1. Can I avoid tax audit if I go fully digital?

Yes, if digital receipts ≥95%, your threshold increases to ₹10 crore.

Q2. Is audit required for losses?

Yes, if turnover crosses the threshold.

Q3. Does a freelancer need tax audit?

Yes, if receipts exceed ₹50 lakh.

Q4. Is GST audit still applicable?

No separate GST audit, but 9C certification may apply (explained in next blog).

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: Final CTA

Need a smooth tax audit for FY 2025–26 without last-minute stress?
👉 Let WonderTax handle everything efficiently.
https://wondertax.in/contact-us