Tax Audit Limit AY 2026-27: Section 44AB Thresholds Explained

For AY 2026-27, tax audit under Section 44AB applies where business turnover exceeds ₹1 crore, rising to ₹10 crore where cash receipts and cash payments are each 5% or less of respective totals. For professionals the limit is ₹50 lakh with no digital enhancement. The audit report is due 30 September 2026 and the return 31 October 2026.

One point of terminology worth settling first: AY 2026-27 covers income earned in FY 2025-26, and is governed by the Income-tax Act, 1961, so Section 44AB and the other references below are 1961 Act provisions. The Income-tax Act, 2025 applies from tax year 2026-27 onwards.

The thresholds

Business. The basic threshold is ₹1 crore. The enhanced threshold of ₹10 crore applies only where both cash receipts and cash payments are each 5% or less of their respective totals. Failing either limb reverts the limit to ₹1 crore — the test is cumulative, not alternative.

Profession. A flat ₹50 lakh, with no digital uplift available.

Presumptive taxation

Section 44AD (business): turnover limit ₹2 crore, rising to ₹3 crore where at least 95% of receipts are digital. Presumptive income is 8% of cash receipts and 6% of digital receipts.

Section 44ADA (specified professionals): gross receipts limit ₹50 lakh, rising to ₹75 lakh where at least 95% of receipts are digital. Presumptive income is 50% of gross receipts.

A taxpayer who has opted into presumptive taxation and subsequently declares income lower than the presumptive rate, while having income above the basic exemption limit, is required to have accounts audited.

The lock-in is frequently missed: opting out of presumptive taxation can bar re-entry for a number of years, making the decision less reversible than it appears.

Due dates and penalty

The audit report in Forms 3CA or 3CB together with Form 3CD is due 30 September 2026. The return for audit cases is due 31 October 2026.

Missing the audit deadline has consequences beyond the audit itself, because the return due date and, in turn, loss carry-forward eligibility depend on it. Penalty for failure to obtain or furnish the report is computed as a percentage of turnover subject to a monetary cap.

Points that recur

Turnover computation for the threshold is a recurring source of error — particularly the treatment of GST collected, of derivative and speculative transaction turnover, and of other income. Derivative turnover is computed on a basis that differs from gross contract value.

The interaction with transfer pricing reporting is separate: an entity may require a transfer pricing report irrespective of the tax audit threshold.

Related reading

• tax year vs assessment year — Tax Year vs Assessment Year: What Changed from April 2026
• the compliance calendar — Compliance Calendar FY 2026-27: Income Tax, GST, FEMA and ROC
• carry-forward conditions — Set-Off and Carry-Forward of Losses in India: Rules and Errors

Sources

• Section 44AB, Income-tax Act, 1961 — incometax.gov.in