Tax Audit under Section 44AB of the Income Tax Act, 1961 (Updated for Finance Act 2025)
📌 What is a Tax Audit?
A Tax Audit is a special audit conducted under the Income Tax Act, 1961. It is different from a regular statutory audit and focuses on ensuring:
- Accurate computation of taxable income
- Proper claim of deductions
- Compliance with tax laws
The audit is conducted by a Chartered Accountant (CA) and is applicable to businesses and professionals beyond specific thresholds.
⚖️ Applicability of Section 44AB (As per Finance Act 2025)
1️⃣ For Business Entities (Not opting for Presumptive Scheme)
- Tax Audit is mandatory if turnover exceeds ₹1 crore.
- If at least 95% of receipts and payments are in digital mode, the threshold increases to ₹10 crore.
Business A with ₹8.5 crore turnover and 96% digital transactions → No Tax Audit
Business B with ₹9 crore turnover but only 90% digital → Tax Audit applicable
2️⃣ For Professionals
If your gross receipts from a profession exceed ₹50 lakh, Tax Audit is applicable. This includes doctors, lawyers, engineers, consultants, freelancers, and influencers earning sponsorship income.
3️⃣ For Presumptive Taxation Cases (Sections 44AD, 44ADA, 44AE)
Tax Audit is mandatory if a taxpayer under presumptive taxation:
- Declares income below the prescribed presumptive rate
- And total income exceeds the basic exemption limit
| Section | Applies To | When Audit is Required |
|---|---|---|
| 44AD | Small businesses (≤ ₹2 Cr turnover) | If income < 8% (or 6% if digital) and income exceeds exemption limit |
| 44ADA | Professionals (≤ ₹50 lakh) | If income < 50% of receipts and income exceeds exemption limit |
| 44AE | Goods vehicle owners | If declared income is below deemed limit |
📄 Forms & Procedure
- Form 3CA – for those already under statutory audit
- Form 3CB – for others
- Form 3CD – statement of particulars (over 50 clauses)
These forms must be filed electronically by a CA through the Income Tax Portal.
🗓️ Due Dates for AY 2025-26
- Tax Audit Report: 30th September 2025
- ITR Filing (audited cases): 31st October 2025
⚠️ Penalty under Section 271B
Failure to conduct tax audit, when applicable, may attract a penalty of:
- 0.5% of turnover or ₹1,50,000, whichever is lower
No penalty if there is a valid reason like CA illness, data loss, natural calamity, etc.
🧠 Summary Table
| Category | Threshold | When Audit is Required |
|---|---|---|
| Business (Normal) | ₹1 crore (₹10 crore if digital ≥95%) | Turnover exceeds threshold |
| Professionals | ₹50 lakh | Gross receipts exceed limit |
| Presumptive Schemes | ₹2 Cr / ₹50L | Declared income less than prescribed + income exceeds exemption |
🆕 What’s New in 2025?
- Stricter monitoring of digital vs. cash transactions
- AI-enabled scrutiny of Form 3CD
- Integration with GST, TDS, and PAN-Aadhaar systems
- Greater focus on professional income reporting
🎯 Why is Section 44AB Important?
Tax audit builds a bridge of trust and compliance between the taxpayer and the government. It ensures:
- Standardization in tax reporting
- Reduction in tax evasion
- Improved tax planning
- Better policy-making based on real data
“Section 44AB is not just a tax rule. It is a trust-building mechanism in India’s digital economy.”
