India’s Income Tax Act’s section 44AB audit rules are becoming more stringent, with new thresholds and deadlines reflecting a push towards digitalisation and stricter compliance for businesses and professionals.
Section 44AB of India’s Income Tax Act requires certain businesses and professionals to have their books checked by a chartered accountant once turnover or gross receipts cross prescribed limits. According to CAclubindia, the rule is designed both to test the accuracy of income reporting and to give tax authorities greater confidence in the figures filed by taxpayers.
For businesses, the usual audit trigger remains annual turnover of more than ₹1 crore. Several guides, including those from TaxAj, ClearTax and Regitom, also note a higher threshold of ₹10 crore where cash transactions stay below 5% of receipts and 5% of payments, reflecting the law’s push towards digital business. Professionals face a lower standard test: gross receipts above ₹50 lakh.
The audit rules become stricter under presumptive taxation. CAclubindia says businesses using section 44AD can face a compulsory audit if they declare income below the prescribed profit rate and their total income is above the basic exemption limit. A similar rule applies to professionals under section 44ADA if they report profits below 50% of receipts. The site also notes that taxpayers who opt out of 44AD after using it may be blocked from the scheme for five years, during which audit obligations can continue if income exceeds the exemption limit.
Deadlines matter as much as the threshold. The audit report, usually filed in Forms 3CA or 3CB with Form 3CD, is due by 30 September of the assessment year, while the income tax return generally follows by 31 October. Where transfer pricing rules apply, the audit timetable is extended further. Failure to comply can attract a penalty under section 271B of up to 0.5% of turnover or gross receipts, capped at ₹1,50,000, although reasonable cause can protect a taxpayer from penalty.
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