Tax Audit Under Section 44AB: Who, When and How (AY 2026-27)

Thresholds at a glance (AY 2026-27)

• Business: Rs. 1 crore turnover; enhanced Rs. 2 crore if cash receipts and payments are each under 5% of turnover
• Profession: Rs. 75 lakh gross receipts; enhanced Rs. 1 crore with the same cash condition
• Second consecutive year under 44AD: still No audit if income is declared at presumptive rate
• Presumptive cases (44AD/44ADA): no audit otherwise required below the thresholds

The audit itself

• Verifies books, turnover, expenses, taxability of each certified item in 3CD
• 3CD covers 32+ clauses - loans, TDS, R&D, 44AB-related declarations
• Completed before the return; report signed by the practising CA
• Digital signature of the auditor and assessee on the income tax portal

Planning before the audit

• Close books by July; reconcile bank and credit card statements
• Reconcile TDS deducted (24Q/26Q) with challans and TCS (27EQ)
• Keep the ratio for the Rs. 1 lakh / Rs. 75 lakh digital threshold: verify your cash receipts and payments proportion now
• Decide early whether your entity uses the new vs old regime for this FY

Common mistakes

• Reconciliation mismatches between 3CD clause 25 and AIS
• Taxes paid covered in expenses
• Reimbursement vs income misclassification inflating turnover over the limit
• Treating a presumptive scheme as an audit escape without verifying the profit rate conditions

What you should do

• Check your turnovers as on 31 March 2026 and flag audit applicability
• Appoint the auditor in writing (companies do this at AGM)
• Provide all trial balances, reconciliations and registrations to the auditor by August
• File the 3CA/3CB + 3CD report by 30 September 2026 on the portal
• Book the ITR after the audit - audited cases are due 31 October 2026