🚀 Fincover® App is Now Live!
Join 10 Million+ users on web – now available on mobile!
Last updated on: July 29, 2025
Income Tax Audit Section 44AB under the Income Tax Act, 1961, mandates certain individuals and businesses to get their accounts audited by a qualified Chartered Accountant if their gross receipts, turnover, or sales exceed the prescribed threshold in a financial year. As of AY 2023–24, audit is required if turnover exceeds ₹1 crore for businesses (₹10 crore if digital transactions constitute more than 95% of transactions) and ₹50 lakh for professionals. The main purpose is to verify the correctness of income declared and ensure compliance with tax laws. The audit report must be filed electronically using Form 3CA/3CB and Form 3CD before the specified due date. Non-compliance can lead to penalties, making it vital for eligible taxpayers to adhere to Section 44AB requirements to avoid legal consequences.
Author
Read Bio
Reviewed by
Read BioIncome tax audit under Section 44AB of the Income Tax Act, 1961, is a critical aspect of taxation in India. For business owners, professionals, and even salaried individuals with side incomes in 2025, understanding its procedures and requirements is essential. This comprehensive guide covers the latest provisions, practical FAQs, essential compliance tips, and expert insights based on first-hand experience.
Section 44AB mandates certain taxpayers to get their accounts audited by a chartered accountant. This audit ensures the declared income, claims, and deductions are genuine and as per regulations. For Assessment Year 2025-26, amendments and limits have been updated to match current business realities.
A tax audit assures the integrity of tax filings. It is performed to check if your books comply with income tax laws, inform authorities about discrepancies or hidden incomes, and standardise the assessment process. It serves as a check on fraudulent practices and promotes transparency.
In 2025, any individual, partnership, LLP, company, or entity must conduct a tax audit if:
First-time business owners and new professionals must be careful. With increasing digital payments, some traditional traders may now easily cross these limits due to volume growth.
Did you know?
Non-compliance with Section 44AB can attract a penalty of up to 0.5 percent of turnover, maxing at ₹1,50,000.
As per recent updates:
If you have:
Experts’ Insights:
Increasing non-cash, digital transactions can help you avoid mandatory tax audit if overall cash dealings are under 5 percent, so using online modes is not just smart but now tax efficient.
The process requires submission of:
All three forms are e-filed through your income tax portal account.
Penalty is 0.5 percent of turnover/gross receipts, up to ₹1,50,000. However, if reasonable cause is proven (such as medical emergencies, natural calamities), penalties may be waived.
Did you know?
Government ruling favours digitally compliant businesses — using net banking and UPI payments not only boosts audit limits, but also reduces compliance burden under Section 44AB.
Form 3CD requires disclosure of:
Experts’ Insights:
Marketplaces for accounting software let you review, compare, and buy the right solution at competitive prices — reducing audit hassles and saving costs.
| Criteria | Pros (Advantages) | Cons (Disadvantages) |
|---|---|---|
| Transparency | Builds business credibility | Can expose errors if books are weak |
| Compliance | Avoids income tax scrutiny and penalty | Requires regular and disciplined records |
| Loan Support | Helps secure higher business loans | Increases professional fees |
| Growth Readiness | Attracts good investors/partners | Can be time-consuming for small firms |
Q: Is tax audit different from statutory audit?
A: Yes. Tax audit is only for income tax law compliance under Section 44AB, while statutory audit is for company law and broader financial accuracy.
| Particulars | Section 44AB Audit | Section 44AD Presumptive Taxation |
|---|---|---|
| Who can opt | All businesses beyond limits | Individuals, HUFs, Partnership (not LLP) below ₹2 crore turnover |
| Method | Based on actual profits | Fixed profit percent of turnover |
| Applicability | Mandatory if limits crossed | Optional for eligible persons |
| Audit Requirement | Yes | No, if conditions met |
| Books of Accounts | Compulsory | Not compulsory (up to limit) |
If your business turnover or receipts are near the threshold, discuss with your CA the future plans — switching from presumptive to regular taxation brings audit requirements for subsequent years.
Online platforms automatically document sales and payments, pushing many retailers past audit limits quickly. Their profit margins may also be scrutinised, especially when involved in high-value electronics, jewellery, or seasonal goods.
From personal experience handling SME accounts, staying audit-ready means:
Q: Can online accounting software help with Section 44AB audits?
A: Yes. They streamline record keeping, automate compliance, and make reconciliation with CA easy.
Yes, but government’s digital push incentivises online transactions. Cash above 5 percent can drastically lower audit limits, so online payments through cards, wallets, UPI are recommended.
Startup founders must vigilantly monitor their receipts — sudden funding or one-time deals can push turnover over limits even in early years. Proper monthly reconciliations and accountant guidance are crucial.
Online marketplaces have made compliance services, CA advice, and accounting software comparison easier and more affordable — saving time and hassle for founders and business owners.
Tax audit under Section 44AB is compulsory if you cross set turnover or receipts limits. It’s done by a chartered accountant before 30 September. Use of non-cash transactions can help avoid audits for smaller businesses. Always keep records detailed and discuss with finance professionals well before deadlines to stay penalty free and compliant.
A: ₹1 crore for business, raised to ₹10 crore if cash transactions are under 5 percent, and ₹50 lakh for professions.
A: Only if receipts from freelancing cross ₹50 lakh per annum.
A: Forms 3CA or 3CB, and 3CD as per notified rules.
A: If cash receipts/payments cross 5 percent of total, normal (lower) turnover audit limits apply.
A: Yes, if reasonable cause like natural disaster or illness is shown.
A: Use online marketplaces to compare CA services, accounting software and compliance solutions for best price and user experience.
Sources:
This article presents the most authentic, up-to-date, and practical information on Section 44AB Audit for taxpayers in 2025. Stay informed, stay compliant.
How could we improve this article?
Written by Prem Anand, a content writer with over 10+ years of experience in the Banking, Financial Services, and Insurance sectors.
Prem Anand is a seasoned content writer with over 10+ years of experience in the Banking, Financial Services, and Insurance sectors. He has a strong command of industry-specific language and compliance regulations. He specializes in writing insightful blog posts, detailed articles, and content that educates and engages the Indian audience.
The content is prepared by thoroughly researching multiple trustworthy sources such as official websites, financial portals, customer reviews, policy documents and IRDAI guidelines. The goal is to bring accurate and reader-friendly insights.
This content is created to help readers make informed decisions. It aims to simplify complex insurance and finance topics so that you can understand your options clearly and take the right steps with confidence. Every article is written keeping transparency, clarity, and trust in mind.
Based on Google's Helpful Content System, this article emphasizes user value, transparency, and accuracy. It incorporates principles of E-E-A-T (Experience, Expertise, Authoritativeness, Trustworthiness).
Download our app and explore loans, insurance, and investments – all in one place.
