What Is Tax Audit under Section 44AB?
Tax Audit under Section 44AB of the Income-tax Act, 1961 is a mandatory compliance for certain businesses and professionals based on turnover, gross receipts, or presumptive taxation rules. ICAI released a revised Guidance Note in 2025, clarifying the audit procedures and documentation standards for Chartered Accountants.
If your business crosses ₹1 crore turnover (or ₹10 crore in digital mode cases), a tax audit may apply.
Who Is Required to Get a Tax Audit?
As per Section 44AB, the following categories need tax audit:
| Category | Threshold |
|---|---|
| Business (General) | Turnover > ₹1 crore |
| Business (Digital mode ≥ 95%) | Turnover > ₹10 crore |
| Profession | Gross receipts > ₹50 lakh |
| Section 44AD (Presumptive Business) | Declares income < 6%/8% of turnover |
| Section 44ADA (Presumptive Profession) | Declares income < 50% of receipts |
| Section 44AE/44BB/44BBB | If not following presumptive scheme |
📌 Note: Even those not otherwise liable may need a tax audit if they claim losses or switch tax regimes.
Key Changes in ICAI Guidance Note (Revised 2025)
The Institute of Chartered Accountants of India (ICAI) updated its Guidance Note on Tax Audit in 2025. Key additions include:
- Clarity on reporting crypto transactions and foreign payments.
- Audit approach for gig economy workers, influencers, and e-commerce sellers.
- Mandatory disclosure of GST turnover reconciliation.
- Format changes in reporting of related party transactions.
- Integration with Clause 44 (break-up of total expenditure under GST registered/unregistered vendors).
Forms, Clauses & Filing Procedure
Tax Audit involves preparing the audit report in Form 3CA/3CB and detailed disclosures in Form 3CD. Here’s a breakdown:
| Form | Used For |
|---|---|
| Form 3CA | If accounts are already audited under other laws (like Companies Act) |
| Form 3CB | If no other audit is applicable |
| Form 3CD | Statement of particulars (34 clauses) |
Notable Clauses in Form 3CD:
- Clause 8: Method of accounting
- Clause 12: Valuation of stock
- Clause 21: Deductions under Chapter VI-A
- Clause 26: Section 43B payments
- Clause 34: TDS/TCS compliance
- Clause 44: GST expenditure bifurcation
Due Dates for Tax Audit – AY 2025–26
| Category | Due Date |
|---|---|
| Non-transfer pricing cases | 30 September 2025 |
| Transfer pricing cases (Section 92E) | 31 October 2025 |
Penalty for delay: ₹1.5 lakh or 0.5% of turnover, whichever is lower (Section 271B).
Audit Exemption for Digital Transactions
If more than 95% of receipts and payments are done digitally and turnover is below ₹10 crore, tax audit is not required for business under Section 44AB(a). However, maintain proper bank statements, UPI logs, and payment gateway reports as evidence.
Practical Tip from Efiletax Expert
While the audit threshold may seem relaxed due to digital payment rules, many small businesses fall under audit due to non-compliance with presumptive income norms or improper bookkeeping. CAs should proactively educate clients on Clause 44 (GST-wise expense reporting), which is now actively verified during scrutiny.
FAQs on Tax Audit under Section 44AB
Q1. Can an individual salaried person be subject to tax audit?
No, unless they also run a business or profession crossing the audit threshold.
Q2. Is tax audit applicable for income from F&O trading?
Yes, since F&O income is treated as business income and can trigger tax audit based on turnover and profit margin.
Q3. Are LLPs and Partnerships also liable for tax audit?
Yes, the rules apply uniformly to proprietorships, partnerships, LLPs, and companies.
Q4. What is Clause 44 and why is it critical now?
Clause 44 requires reporting of expenditure break-up based on GST registration status of vendors. It’s vital for matching income-tax and GST data.
Conclusion
Tax Audit under Section 44AB is more than just a formality. With the revised ICAI Guidance Note (2025), compliance now requires deeper reporting and cross-verification with GST and digital transactions. Whether you are a small business or a CA firm, Efiletax can simplify the audit journey, offering expert-led assistance for Form 3CD filing and Clause 44 compliance.
👉 Need help with your Tax Audit? Reach out to Efiletax for end-to-end audit support.
Summary
Section 44AB tax audit is mandatory for businesses and professionals exceeding specified turnover limits. ICAI’s 2025 guidance note introduces stricter reporting norms, including Clause 44 for GST linkage. Learn who needs audit, which forms apply, and how to file before deadlines to avoid penalties.