Section 44AB Tax Audit for AY 2026-27: Applicability, Forms, Due Dates and Reconciliations
This article explains how to decide whether a tax audit under Section 44AB of the Income-tax Act, 1961 applies for AY 2026-27 (FY 2025-26), which report form to use, and which reconciliations should be completed before Form 3CD is uploaded.
Audit engagements are accepted and planned months before the filing season, and errors usually trace to three sources: threshold tests applied from memory, due dates taken from headlines, and prior-year Form 3CD answers carried forward. The practitioner is better placed if each is tested against current facts and the operative order.
Issue 1: Does Section 44AB apply
Section 44AB prescribes audit for specified businesses and professions subject to turnover or gross-receipt thresholds, presumptive-taxation conditions and exceptions.
- Business. The threshold is Rs 1 crore ordinarily. It extends up to Rs 10 crore where cash receipts and cash payments each stay within the prescribed 5% limits. For this enhanced limit, non-account-payee cheques and bank drafts are treated as cash.
- Profession. The threshold is gross receipts of Rs 50 lakh ordinarily.
The thresholds are not universal exemptions. The specific clauses of Section 44AB and the presumptive provisions must be examined for the assessee, and applicability is not determined merely by turnover in GST returns.
Testing the enhanced limit
The cash-receipt percentage and the cash-payment percentage are computed separately, each supported by bank statements and the cash book. Both conditions must be met. Applying the Rs 10 crore limit after testing only one of them is a recurring error.