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Tax audit under Section 44AB for Assessment Year 2025-26 hinges on turnover/receipts, the extent of digital transactions, and the use of presumptive taxation schemes (44AD/44ADA). For businesses, the audit threshold is ₹1 crore, which is relaxed to ₹10 crore if at least 95% of all receipts and payments are made digitally. Businesses opting for the 44AD scheme (turnover up to ₹2 crore, or ₹3 crore if 95% digital) must declare profit at 8% (or 6% for digital receipts); an audit is mandated if the declared profit is less than the deemed rate and their total income exceeds the basic exemption limit (44AB(e)), or if they opt out of 44AD within the five-year lock-in period with taxable income. For specified professionals, the base audit threshold is ₹50 lakh in gross receipts, or ₹75 lakh if 95% digital. Professionals using the 44ADA scheme must declare at least 50% profit; an audit under 44AB(d) is required only if they declare less than 50% and their total income is taxable. Essentially, an audit is triggered either by exceeding the turnover/receipt limits without the digital benefit or by improperly declaring low profits under a presumptive scheme while having taxable income.
1) Overview
1.1 Tax audit applicability under Section 44AB is determined by turnover, digital transactions, and presumptive taxation choices under Section 44AD (Business) and Section 44ADA (Profession).
1.2 For businesses, a tax audit is required if turnover exceeds ₹1 crore, though this threshold is extended to ₹10 crore if at least 95% of all receipts and payments are digital.
1.3 Under the presumptive scheme Section 44AD, eligible businesses with turnover up to ₹2 crore (or ₹3 crore if 95% digital) can declare income at 8% (or 6% for digital receipts).
1.4 However, if an assessee opts out of 44AD within five years and their total income exceeds the basic exemption limit, an audit becomes mandatory under 44AB(e).
1.5 For prescribed professionals, the audit threshold is ₹50 lakh in gross receipts, or ₹75 lakh if 95% of receipts are digital. Under Section 44ADA, professionals declaring income less than 50% of gross receipts must undergo an audit under 44AB(d) only if their total income also exceeds the basic exemption limit.
1.6 Generally, audit is triggered when a turnover/receipt threshold is crossed without meeting the digital transaction criteria, or when a presumptive scheme is either not opted for or improperly used, resulting in taxable income below the minimum presumptive percentage. Master Summary of the Provisions of Tax Audit & Presumptive Tax Exemption Tabular Master Summary of eligibility for audit under different situations
Table 1: Criteria for Tax Audit Requirement under Section 44AB – Turnover/Receipts and Presumptive Schemes
(captures the statutory conditions and thresholds for business and professional assessees)
2.1 How to identify the applicability of tax audit based on –Table-1
1. Identify the category: Business or Profession.
2. Check turnover or gross receipts and the percentage of digital receipts and payments to locate the correct row.
3. See whether the presumptive scheme (44AD or 44ADA) is opted and compare the profit percentage declared with the required presumptive rate.
4. Determine whether total income is more than or not more than the basic exemption limit.
The last two columns show whether a tax audit is required and the specific clause of Section 44AB that applies.
TABLE-1
| S.N. | Turnover / Receipts Band and digital-percentage test | Presumptive scheme status | Declared profit compared with presumptive rate | Total income position | Audit required | Relevant clause of Section 44AB |
| 1 | Up to ₹1 crore (digital percentage immaterial) | 44AD not opted | Any level of profit | Any level | No | – |
| 2 | More than ₹1 crore but not more than ₹10 crore and digital receipts and payments equal to or more than 95% | 44AD not opted | Any level of profit | Any level | No | – |
| 3 | More than ₹1 crore but not more than ₹10 crore and digital receipts and payments less than 95% | 44AD not opted | Any level of profit | Any level | Yes | 44AB(a) |
| 4 | Eligible and opted for 44AD (turnover up to ₹2 crore or up to ₹3 crore where digital receipts and payments equal to or more than 95%) | Opted 44AD | Profit declared equal to or more than 6% or 8% as applicable | Any level | No | – |
| 5 | Same as above | Opted 44AD | Profit declared less than 6% or 8% | Total income equal to or less than the basic exemption limit | No | – |
| 6 | Same as above | Opted 44AD | Profit declared less than 6% or 8% | Total income more than the basic exemption limit | Yes | 44AB(e) |
| 7 | Assessee previously opted for 44AD and opted out within five years (lock-out period) | Not eligible for 44AD | Any level of profit | Total income more than the basic exemption limit | Yes | 44AB(e) |
| 8 | Turnover more than ₹10 crore (digital percentage immaterial) | Not relevant | Any level of profit | Any level | Yes | 44AB(a) |
| 9 | Presumptive scheme not opted and turnover does not exceed the applicable audit threshold (₹1 crore or ₹10 crore depending on digital percentage) | Not opted | Any level of profit | Any level | No | – |
| Profession | ||||||
| 10 | Receipts up to ₹50 lakh where digital receipts less than 95% or receipts up to ₹75 lakh where digital receipts equal to or more than 95% | Opted 44ADA | Profit declared equal to or more than 50% of receipts | Any level | No | |
| 11 | Same as above | Opted 44ADA | Profit declared less than 50% of receipts | Total income equal to or less than the basic exemption limit | No | |
| 12 | Same as above | Opted 44ADA | Profit declared less than 50% of receipts | Total income more than the basic exemption limit | Yes | 44AB(d) |
| 13 | Professional receipts more than ₹50 lakh where digital receipts less than 95% or more than ₹75 lakh where digital receipts equal to or more than 95% | 44ADA not available | Any level of profit | Any level | Yes | 44AB(b) |
| 14 | 44ADA not opted though eligible and profit declared less than 50% of receipts | Not opted | Profit declared less than 50% of receipts | Total income more than the basic exemption limit | Yes | 44AB(d) |
Based on the above identification different scenarios can be visualized for testing the same against the above table to find out the requirement of audit in case.
2.2 Table- 2 Different scenarios as visualized from the given conditions
| Sl. No. | Category | Turnover / Receipts Range | Actual Turnover / Receipts | 95% Digital? | Declared Income (6%/8%/50%) | Income Status | Audit Required | 44AB Clause |
| 1 | Business | 0–1 Cr | 0.60 Cr | Na | Na | Na | No | – |
| 2 | Business | 0–2 Cr | 1.50 Cr | Yes | Not opted | Na | No | – |
| 3 | Business | 0–2 Cr | 1.50 Cr | No | Not opted | Na | Yes | 44AB(a) |
| 4 | Business | 0–2 Cr | 1.50 Cr | Yes | Opted | Na | No | – |
| 5 | Business | 0–2 Cr | 1.50 Cr | No | Opted | Na | No | – |
| 6 | Business | 0–3 Cr | 2.50 Cr | Yes | Not opted | Na | No | – |
| 7 | Business | 0–3 Cr | 2.50 Cr | No | Not opted | Na | Yes | 44AB(a) |
| 8 | Business | 0–3 Cr | 2.50 Cr | Yes | Opted | Na | No | – |
| 9 | Business | 0–3 Cr | 2.50 Cr | No | Opted | Na | Yes | 44AB(a) |
| 10 | Business | 0–10 Cr | 8.50 Cr | Yes | Not eligible | Na | No | – |
| 11 | Business | 0–10 Cr | 8.50 Cr | No | Not eligible | Na | Yes | 44AB(a) |
| 12 | Business | 0–2 Cr | 1.50 Cr | Yes | Previous Default 44AD | Exempt | No | – |
| 13 | Business | 0–2 Cr | 1.50 Cr | Yes | Previous Default 44AD | Taxable | Yes | 44AB(a) |
| 14 | Business | 0–2 Cr | 1.50 Cr | No | Previous Default 44AD | Exempt | Yes | 44AB(a) |
| 15 | Business | 0–2 Cr | 1.50 Cr | No | Previous Default 44AD | Taxable | Yes | 44AB(e) |
| 16 | Business | 0–3 Cr | 2.50 Cr | Yes | Previous Default 44AD | Exempt | No | – |
| 17 | Business | 0–3 Cr | 2.50 Cr | Yes | Previous Default 44AD | Taxable | Yes | 44AB(e) |
| 18 | Business | 0–3 Cr | 2.50 Cr | No | Previous Default 44AD | Exempt | Yes | 44AB(a) |
| 19 | Business | 0–3 Cr | 2.50 Cr | No | Previous Default 44AD | Taxable | Yes | 44AB(e) |
| 20 | Business | 0–2 Cr | 1.80 Cr | Yes | Not opted | Loss/≤Exemption | No | – |
| 21 | Business | 0–2 Cr | 1.80 Cr | No | Not opted | Loss/≤Exemption | Yes | 44AB(a) |
| 22 | Business | 0–2 Cr | 1.80 Cr | Yes | Opted | ≤6% & ≤Exemption | No | – |
| 23 | Business | 0–2 Cr | 1.80 Cr | Yes | Opted | <6% & Taxable | Yes | 44AB(e) |
| 24 | Business | 0–2 Cr | 1.80 Cr | No | Opted | ≥8% | No | – |
| 25 | Business | 0–2 Cr | 1.80 Cr | No | Opted | <8% & Taxable | Yes | 44AB(e) |
| 26 | Business | 0–3 Cr | 2.80 Cr | Yes | Not opted | Any | No | – |
| 27 | Business | 0–3 Cr | 2.80 Cr | Yes | Opted | 6%/8% Mixed OK | No | – |
| 28 | Business | 0–3 Cr | 2.80 Cr | Yes | Opted | <Deemed & Taxable | Yes | 44AB(e) |
| 29 | Business | 0–3 Cr | 2.80 Cr | No | Opted (ineligible) | ≥8% | Yes | 44AB(a) |
| 30 | Business | 0–3 Cr | 2.20 Cr | Yes | Previous Default | ≥8% | No | – |
| 31 | Business | 0–3 Cr | 2.20 Cr | Yes | Previous Default | <Deemed & Taxable | Yes | 44AB(e) |
| 32 | Business | 0–10 Cr | 5.50 Cr | Yes | Not opted | Any | No | – |
| 33 | Business | 0–10 Cr | 10.50 Cr | Any | Not eligible | Any | Yes | 44AB(a) |
| 34 | Business | 0–1 Cr | 1.00 Cr | No | Not opted | Any | No | – |
| 35 | Business | 0–1 Cr | 1.00 Cr | Yes | Not opted | Any | No | – |
| 36 | Business | 0–10 Cr | 10.00 Cr | Yes | Not opted | Any | No | – |
| 37 | Business | 0–10 Cr | 10.00 Cr | No | Not opted | Any | Yes | 44AB(a) |
| 38 | Business | 0–2 Cr | 1.80 Cr | Yes | Not opted | Loss | No | – |
| 39 | Business | 0–2 Cr | 1.80 Cr | No | Not opted | Loss | Yes | 44AB(a) |
| 40 | Profession | 0–50 L | 0.40 L | Na | Income ≥50% | Na | No | – |
| 41 | Profession | 0–50 L | 0.40 L | Na | Income <50% | Taxable | No | 44AB(d) |
| 42 | Profession | 0–50 L | 0.40 L | Na | Income <50% | Exempt | No | – |
| 43 | Profession | 0–75 L | 0.70 L | Yes | Income ≥50% | Na | No | – |
| 44 | Profession | 0–75 L | 0.70 L | No | Income <50% | Taxable | Yes | 44AB(b) |
| 45 | Profession | 0–75 L | 0.70 L | No | Income <50% | Exempt | Yes | 44AB(b) |
| 46 | Profession | 0–75 L | 0.70 Cr | Yes | <50% | Taxable | Yes | 44AB(d) |
| 47 | Profession | 0–75 L | 0.70 Cr | Yes | <50% | Exempt | No | – |
| 48 | Profession | 0–1 Cr | 0.80 Cr | Yes | ≥50% | Receipts >75 L: 44ADA not available | Yes | 44AB(b) |
| 49 | Profession | 0–1 Cr | 0.80 Cr | Yes | <50% | Receipts >75 L: 44ADA not available | Yes | 44AB(b) |
| 50 | Profession | 0–1 Cr | 0.80 Cr | Yes | <50% & ≤Exemption | Receipts >75 L: 44ADA not available | Yes | 44AB(b) |
| 51 | Profession | 0–50 L | 0.50 Cr | Any | <50% | Taxable | Yes | 44AB(d) |
| 52 | Profession | 0–75 L | 0.75 Cr | Yes | ≥50% | Any | No | – |
| 53 | Profession | 0–75 L | 0.75 Cr | Yes | <50% | Taxable | Yes | 44AB(d) |
| 54 | Profession | 0–75 L | 0.55 Cr | No | <50% | Exempt | Yes | 44AB(b) |
2.2 Legend – Explanation of Notations
Declared Income (6 % / 8 % / 50 %) column
1) Opted / Not opted – Whether the assessee has opted for presumptive taxation under the relevant section.
2) 6 % / 8 % – Presumptive rate of profit under section 44AD:
- 6 % for receipts through prescribed digital modes,
- 8 % for other receipts (cash etc.).
3) 50 % – Presumptive rate of profit under section 44ADA for professionals.
4) 6 %/8 % Mixed OK – Part receipts digital (6 %) and part in cash (8 %) but overall profit meets the required weighted percentage.
5) <6 % / <8 % / <50 % – Actual profit declared is lower than the respective presumptive percentage.
6) ≤6 % & ≤Exemption – Profit lower than 6 % but total income does not exceed the basic exemption limit.
7) ≥8 % – Profit declared equals or exceeds 8 %.
8) <Deemed – Profit declared is lower than the presumptive percentage (6 %/8 %).
9) Prev Default / Previous Default 44AD – Assessee earlier opted for 44AD and then opted out within five years; barred from 44AD for next five years.
10) Not eligible – Assessee cannot use presumptive scheme because turnover/receipts exceed the limit.
Income Status column
11) Taxable – Total income exceeds the basic exemption limit under the Income-tax Act.
12) Exempt / ≤Exemption – Total income does not exceed the basic exemption limit.
13) Loss – Business/profession shows a loss.
14) Any – Income level immaterial for the audit requirement in that row.
15) Receipts >75 L: 44ADA not available – For professionals, gross receipts exceed the enhanced 75-lakh ceiling; presumptive 44ADA scheme cannot be used irrespective of profit percentage.
3.1 Row-wise Explanatory Notes on Tax Audit Applicability
Row 1 – Turnover is ₹0.60 Cr. Conditions of section 44AB are not triggered; audit is not applicable.
Row 2 – Turnover is ₹1.50 Cr, digital receipts ≥95 %, presumptive scheme not opted. 10 Cr digital threshold applies; audit is not required.
Row 3 – Turnover is ₹1.50 Cr, digital receipts <95 %. The higher 10 Cr threshold is not available; turnover exceeds ₹1 Cr. Audit is required u/s 44AB(a).
Row 4 – Turnover is ₹1.50 Cr, digital receipts ≥95 %, presumptive scheme opted. Conditions of section 44AB not triggered; no audit.
Row 5 – Turnover is ₹1.50 Cr, digital receipts <95 %, presumptive scheme opted. Conditions of section 44AB not triggered; no audit.
Row 6 – Turnover is ₹2.50 Cr, digital receipts ≥95 %, presumptive not opted. 10 Cr threshold applies; no audit.
Row 7 – Turnover is ₹2.50 Cr, digital receipts <95 %. Higher threshold not available; turnover >1 Cr. Audit u/s 44AB(a).
Row 8 – Turnover ₹2.50 Cr, digital receipts ≥95 %, presumptive opted. Eligible for 44AD up to 3 Cr; no audit.
Row 9 – Turnover ₹2.50 Cr, digital receipts <95 %, presumptive opted. 44AD limit breached; audit u/s 44AB(a).
Row 10 – Turnover ₹8.50 Cr, digital receipts ≥95 %. 10 Cr threshold applies; no audit.
Row 11 – Turnover ₹8.50 Cr, digital receipts <95 %. Higher threshold not available; audit u/s 44AB(a).
Row 12 – Turnover ₹1.50 Cr, digital receipts ≥95 %, previous 44AD default, income exempt. 10 Cr digital threshold applies; no audit.
Row 13 – Same as Row 12 but income taxable. Previous 44AD default with taxable income; audit u/s 44AB(a).
Row 14 – Turnover ₹1.50 Cr, digital receipts <95 %, previous 44AD default, income exempt. Turnover >1 Cr; audit u/s 44AB(a).
Row 15 – Turnover ₹1.50 Cr, digital receipts <95 %, previous 44AD default, income taxable. Audit u/s 44AB(e).
Row 16 – Turnover ₹2.50 Cr, digital receipts ≥95 %, previous 44AD default, income exempt. 10 Cr threshold applies; no audit.
Row 17 – Same as Row 16 but income taxable. Audit u/s 44AB(e).
Row 18 – Turnover ₹2.50 Cr, digital receipts <95 %, previous 44AD default, income exempt. Turnover >1 Cr; audit u/s 44AB(a).
Row 19 – Same as Row 18 but income taxable. Audit u/s 44AB(e).
Row 20 – Turnover ₹1.80 Cr, digital receipts ≥95 %, presumptive not opted, income ≤ basic exemption / loss. 10 Cr threshold applies; no audit.
Row 21 – Same as Row 20 but digital receipts <95 %. Higher threshold not available; audit u/s 44AB(a).
Row 22 – Turnover ₹1.80 Cr, digital receipts ≥95 %, opted 44AD, income ≤6 % and ≤ basic exemption. Lower income but not taxable; no audit.
Row 23 – Same as Row 22 but total income exceeds exemption. Lower than deemed profit with taxable income; audit u/s 44AB(e).
Row 24 – Turnover ₹1.80 Cr, digital receipts <95 %, opted 44AD, income ≥8 %. Meets deemed profit; no audit.
Row 25 – Same as Row 24 but income <8 % and taxable. Audit u/s 44AB(e).
Row 26 – Turnover ₹2.80 Cr, digital receipts ≥95 %, not opted 44AD. 10 Cr threshold applies; no audit.
Row 27 – Same as Row 26 but opted 44AD, correctly declared 6 %/8 % on digital/cash mix. No audit.
Row 28 – Same as Row 27 but declared lower than deemed and income taxable. Audit u/s 44AB(e).
Row 29 – Turnover ₹2.80 Cr, digital receipts <95 %, claimed 44AD though ineligible. Turnover >1 Cr; audit u/s 44AB(a).
Row 30 – Turnover ₹2.20 Cr, digital receipts ≥95 %, previous 44AD default, income ≥8 %. 10 Cr threshold applies; no audit.
Row 31 – Same as Row 30 but declared lower than deemed and income taxable. Audit u/s 44AB(e).
Row 32 – Turnover ₹5.50 Cr, digital receipts ≥95 %, not opted 44AD. 10 Cr threshold applies; no audit.
Row 33 – Turnover ₹10.50 Cr, any digital mix. Exceeds 10 Cr limit; audit u/s 44AB(a).
Row 34 – Turnover exactly ₹1 Cr, digital receipts <95 %, not opted. Section 44AB(a) triggers only if turnover exceeds ₹1 Cr; no audit.
Row 35 – Turnover exactly ₹1 Cr, digital receipts ≥95 %, not opted. Same reasoning; no audit.
Row 36 – Turnover exactly ₹10 Cr, digital receipts ≥95 %, not opted. Threshold is “exceeds 10 Cr”; no audit.
Row 37 – Turnover exactly ₹10 Cr, digital receipts <95 %, not opted. Base 1 Cr limit applies and is exceeded; audit u/s 44AB(a).
Row 38 – Turnover ₹1.80 Cr, digital receipts ≥95 %, not opted 44AD, loss. 10 Cr threshold applies; no audit.
Row 39 – Same as Row 38 but digital receipts <95 %. Turnover >1 Cr; audit u/s 44AB(a).
Row 40 – Professional receipts ₹40 L, income ≥50 %. Within 44ADA presumptive limit; no audit.
Row 41 – Professional receipts ₹40 L, income <50 %, total income taxable. Audit u/s 44AB(d).
Row 42 – Same as Row 41 but income ≤ exemption limit. No audit.
Row 43 – Professional receipts ₹70 L, ≥95 % digital, income ≥50 %. Below relaxed 75 L limit and 50 % declared; no audit.
Row 44 – Receipts ₹70 L, <95 % digital, income <50 %, taxable. Base 50 L limit exceeded; audit u/s 44AB(b).
Row 45 – Receipts ₹70 L, <95 % digital, income <50 %, exempt. Base 50 L limit exceeded; audit u/s 44AB(b).
Row 46 – Receipts ₹70 L, ≥95 % digital, income <50 %, taxable. Within relaxed 75 L limit but income <50 % and taxable; audit u/s 44AB(d).
Row 47 – Same as Row 46 but income ≤ exemption limit. Condition of taxable income not met; no audit.
Row 48 – Receipts ₹0.80 Cr (>75 L). 44ADA not available even if ≥95 % digital; audit mandatory u/s 44AB(b).
Row 49 – Same as Row 48 but income <50 % and taxable. Reason remains receipts >75 L; audit u/s 44AB(b).
Row 50 – Same as Row 48 but income <50 % and ≤ exemption limit. Still receipts >75 L; audit u/s 44AB(b).
Row 51 – Receipts ₹0.50 Cr, income <50 %, taxable. Income <50 % with taxable income; audit u/s 44AB(d).
Row 52 – Receipts ₹0.75 Cr, ≥95 % digital, income ≥50 %. At 75 L relaxed limit, 50 % profit declared; no audit.
Row 53 – Same as Row 52 but income <50 % and taxable. Audit u/s 44AB(d).
Row 54 – Receipts ₹0.55 Cr, <95 % digital, income <50 %, exempt. Base 50 L limit crossed; audit u/s 44AB(b).
4.1 Summarized Core Conditions of Section 44AB
1. Business:- Audit if turnover > ₹1 crore (₹10 crore if ≥95% digital receipts/payments).
2. Profession- Audit if gross receipts > ₹50 lakh (₹75 lakh if ≥95% digital receipts).
3. Presumptive business (44AE/44BB/44BBB):- Audit if income claimed lower than deemed.
4. Presumptive profession (44ADA):-Audit if income <50% of receipts and total income > exemption limit.
5. Presumptive business (44AD): Audit if hit by 44AD(4) and income > exemption limit.
6. Exceptions: Not applicable to cases already audited under other laws (with prescribed report filed) or to incomes covered by Sections 44B and 44BBA.
Summarized Core Conditions Section 44AD
7. Eligible resident business can declare profits at 8% of turnover, or 6% for digital receipts, higher income can also be declared.
8. No further deductions allowed — expenses under Sections 30–38 are deemed covered in presumptive rate.
9. WDV of assets computed as if depreciation already allowed each year.
10. If assessee opts out after using 44AD once, he cannot claim it again for the next five years.
11. If sub-section (4) applies and income > exemption limit, assessee must maintain books (44AA) and get audit (44AB).
12. Scheme not available to professionals, commission/brokerage earners, or agency businesses.
13. Explanation: Eligible assessee = resident individual/HUF/firm (not LLP) without profit-linked deductions; eligible business = non-44AE business with turnover ≤ ₹2 crore (or ≤ ₹3 crore if ≥95% receipts/payment are digital).
Summarized Core Condition of Section 44ADA – Professionals
14. Resident individual or partnership firm (not LLP) in specified professions may declare 50% of gross receipts (or higher) as income; ceiling = ₹50 lakh, or ₹75 lakh if ≥95% digital receipts.
15. No further deduction for expenses under Sections 30–38; deemed covered in presumptive income.
16. WDV of assets computed as if depreciation already allowed each year.
17. If income <50% of receipts and total income > exemption limit, assessee must maintain books (44AA) and get audit (44AB).
Disclaimer: The contents of this article are intended solely for academic discussion and general informational purposes. They do not constitute professional advice or an authoritative interpretation of law. While every effort has been made to ensure accuracy, the author and publisher accept no responsibility for errors, omissions, or consequences arising from reliance on this material. Readers are advised to consult the provisions of the Income Tax Act, 1961, relevant rules, circulars, and judicial pronouncements, and to seek professional advice suited to their specific circumstances before acting on any aspect discussed herein. E & O E
(Republished with Amendments)
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