Tax Audit Applicability Explained: Do You Need One?

Section 44AB of the Income Tax Act requires certain businesses and professionals to get their accounts audited. The applicable turnover threshold has changed over the years, particularly for businesses transacting largely in digital payments.

For most businesses, the threshold is Rs. 1 crore in turnover, but this is extended to Rs. 10 crore where cash receipts and payments are each within 5% of total transactions, a significant relief for businesses that operate mostly through banking channels.

Professionals face a separate, lower threshold, and those opting for presumptive taxation schemes under Sections 44AD or 44ADA are generally exempt from tax audit provided they meet the scheme's conditions.

Getting this wrong, either by skipping a required audit or by paying for one you didn't need, can be costly. A quick applicability check before the financial year closes is the simplest way to plan ahead.