Tax Audit Requirement in India for FY 2024-25 (AY 2025-26) – CACube

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Tax Audit Requirement in India for FY 2024-25 (AY 2025-26)

Clipped from: https://cacube.in/tax-audit-requirement-in-india-for-fy-2024-25-ay-2025-26/

A tax audit ensures transparency in income reporting and compliance with the Income Tax Act, 1961. Whether you are a business owner, professional, or company, knowing the audit thresholds can save you from penalties and last-minute stress.

This article explains the provisions under Sections 44AA, 44AB, 44AD, and 44ADA applicable for Financial Year 2024-25 (Assessment Year 2025-26).

🔎What Is a Tax Audit?

A tax audit (u/s 44AB) is the examination of the books of accounts of a taxpayer by a Chartered Accountant (CA) to verify:

  • ✔️Correctness of declared income.
  • ✔️Compliance with accounting standards and tax law.

⚖️Note: Tax Audit ≠ Statutory Audit

  • Statutory audit is compulsory for Companies and LLPs under the Companies Act, irrespective of turnover.
  • Tax audit is conditional and applies only if thresholds are crossed.

📑Section 44AA: Maintenance of Books of Accounts

Not everyone needs a tax audit, but maintenance of books is mandatory above certain limits.

✅FY 2024-25 Thresholds:

  • Business: Turnover > ₹1 crore.
  • Professionals (doctors, lawyers, architects, CAs, engineers, etc.): Gross receipts > ₹75 lakh.

Key Point: Even if a tax audit is not required, you may still need to maintain books under this section.

📦Section 44AD: Presumptive Taxation Scheme (PTS) for Businesses

This scheme reduces compliance burden for small businesses.

Eligible: Resident Individuals, HUFs, Partnership Firms (except LLPs).

📊Turnover Limits:

  • Up to ₹2 crore (general).
  • Up to ₹3 crore if 95%+ transactions are digital.

Presumptive Profits:

  • 8% of turnover (cash transactions).
  • 6% of turnover (digital transactions).

No Audit Required If: Declared profits are ≥ 8% / 6%, as applicable.

Audit Mandatory If:

  • Declared profits are lower than 8%/6%, AND total income > basic exemption (₹2.5 lakh).
  • You opted out of presumptive scheme in any of the last 5 years.

⚖️Section 44ADA: Presumptive Taxation for Professionals

Simplified taxation for specified professionals.

Eligible: Doctors, Lawyers, Architects, Accountants, Technical Consultants, etc.

Turnover Limit (FY 2024-25): Up to ₹75 lakh (if 95%+ digital). (Earlier limit was ₹50 lakh.)

Presumptive Profits: 50% of gross receipts.

No Audit Required If: Declared income = 50% or more.

Audit Mandatory If: Income declared < 50% of gross receipts AND total income > exemption limit.

📋Section 44AB: Tax Audit Requirements for Non-Presumptive Taxation (Non-PTS)

This section applies when taxpayers do not use presumptive schemes (44AD/44ADA).Business Turnover (FY 2024-25) Condition on Cash Transactions Audit Requirement

Up to ₹1 croreAny %❌No audit required
₹1 crore – ₹10 croreCash receipts or payments > 5%✅Audit required
₹1 crore – ₹10 croreCash receipts + payments ≤ 5%❌No audit required
Above ₹10 croreAny %✅Audit mandatory

⚠️Important Clarifications:

  • Earlier, audit was compulsory above ₹1 crore. Now, relief is given up to ₹10 crore turnover if cash transactions are ≤ 5%.
  • If cash transactions > 5%, tax audit is required even between ₹1–10 crore.
  • Above ₹10 crore, audit is always mandatory.

📌Special Situations

  • Opting Out of Presumptive Scheme (44AD): If you exit within 5 years, you must maintain books + get an audit if income > exemption limit.
  • Business Loss (Non-PTS): If turnover > ₹1 crore and loss declared → Audit required.
  • F&O Trading: Futures & Options are treated as business income. If turnover exceeds ₹2 crore (or loss declared beyond limits) → Tax audit applies.
  • Companies & LLPs: Always require statutory audit under company law. Tax audit applies only if Section 44AB thresholds are crossed.

📊Summary Table: Who Needs Tax Audit in FY 2024-25?

Category Turnover Limit Condition Audit Required?

Business (Non-PTS)≤ ₹1 croreAny❌No
Business (Non-PTS)₹1 – 10 croreCash > 5%✅Yes
Business (Non-PTS)₹1 – 10 croreCash ≤ 5%❌No
Business (Non-PTS)> ₹10 croreAny✅Yes
Presumptive Business (44AD)≤ ₹2 crore (general) / ≤ ₹3 crore (95% digital)Profit ≥ 8%/6%❌No
Presumptive Business (44AD)SameProfit < 8%/6% & income > exemption & opted out in last 5 yrs✅Yes
Presumptive Professionals (44ADA)≤ ₹75 lakh (95% digital)Income ≥ 50%❌No
Presumptive Professionals (44ADA)SameIncome < 50% & > exemption✅Yes
Professionals (Non-PTS)> ₹75 lakhAny✅Yes
Companies / LLPsAny turnoverStatutory audit required (Tax audit depends on turnover rules)✅Statutory, conditional Tax audit

📝Conclusion

  • For Businesses: Tax audit mainly depends on turnover and % of cash transactions.
  • For Professionals: Audit depends on turnover and % of income declared.
  • For Presumptive Scheme Users: Audit applies only if profits declared are lower than deemed % and income exceeds exemption.
  • For Companies & LLPs: Statutory audit is always compulsory; tax audit depends on turnover rules.

📊Tax Audit Applicability Flowchart (FY 2024-25 | AY 2025-26)

1️⃣Businesses (Non-Presumptive)

  • Turnover ≤ ₹1 crore →❌No Audit
  • Turnover ₹1–10 crore →
    • If Cash > 5% →✅Audit Required
    • If Cash ≤ 5% →❌No Audit
  • Turnover > ₹10 crore →✅Audit Mandatory

2️⃣Businesses under Presumptive Scheme (44AD)

  • Turnover ≤ ₹2 crore (or ≤ ₹3 crore with 95%+ digital) →
    • If Profit ≥ 8% (cash) / 6% (digital) →❌No Audit
    • If Profit < 8%/6% & Income > exemption & opted out in last 5 yrs →✅Audit Required

3️⃣Professionals under Presumptive Scheme (44ADA)

  • Turnover ≤ ₹75 lakh (95%+ digital) →
    • If Income ≥ 50% of receipts →❌No Audit
    • If Income < 50% & > exemption limit →✅Audit Required
  • Turnover > ₹75 lakh →✅Audit Mandatory

4️⃣Companies & LLPs

  • Statutory Audit Mandatory
  • Tax Audit u/s 44AB → Depends on turnover rules (same as businesses)

Pro Tip: Stay under 5% cash transactions to reduce compliance burden. Always consult a Chartered Accountant before filing returns.

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