## Tax Audit — Section 44AB

The following 5 categories must get their books audited by a Chartered Accountant by the specified date:

a. Business — turnover exceeds ₹1 crore (or ₹10 crore if the cash test below is met).

b. Profession — gross receipts exceed ₹50 lakh.

c. Persons declaring income lower than presumptive income under Section 44AE, 44BB, 44BBB.

d. Persons declaring income lower than presumptive income under Section 44ADA.

e. Persons to whom Section 44AD(4) applies and whose income exceeds the basic exemption limit (BEL).

### The ₹10 crore turnover threshold (cash test)

The ₹1 crore limit is raised to ₹10 crore when:

Aggregate cash receipts ≤ 5% of total receipts, and
Aggregate cash payments ≤ 5% of total payments.

> A bearer cheque or bank draft is treated as a cash transaction for this test.

### Specified date for audit

One month before the due date for filing the return under Section 139(1):

30th September of the assessment year (normal cases),
31st October in transfer-pricing cases.

### Forms

Audit report in Form 3CA or 3CB, with particulars in Form 3CD.

### Penalty — Section 271B

Lower of:

0.5% of turnover/gross receipts, or
₹1,50,000.

### Note

An assessee declaring income under Section 44AD(1) or 44ADA(1) (i.e., complying with presumptive taxation) is NOT required to get a tax audit under Section 44AB.

Worked example

### Example 1

Example — ₹10 crore limit. A trader has turnover of ₹8 crore, with cash receipts of 3% and cash payments of 4% of totals. Both are ≤ 5%, so the ₹10 crore threshold applies and no audit is required.

### Example 2

Example — profession. A doctor's gross receipts are ₹55 lakh. As receipts exceed ₹50 lakh, a tax audit under Section 44AB is mandatory.

### Example 3

Example — penalty. Turnover ₹2 crore, audit not done. Penalty = lower of 0.5% × ₹2 crore (= ₹1,00,000) or ₹1,50,000 → ₹1,00,000.

⚠️ Common exam mistakes

Applying the ₹10 crore limit without verifying BOTH the 5% cash-receipts and 5% cash-payments conditions.
Treating a bearer cheque/draft as a banking transaction for the cash test — it counts as cash.
Requiring audit for an assessee who validly declares income under Section 44AD(1)/44ADA(1).
Using the wrong specified date — it is one month before the 139(1) due date (30 Sep / 31 Oct for TP).

Reference: Section 44AB; Section 271B; Forms 3CA/3CB/3CD — Income-tax Act, 1961

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Compulsory audit of accounts – Section 44AB, forms, due dates and penalty (271B)

Worked example

⚠️ Common exam mistakes