When is a tax audit compulsory, and what are the turnover limits?

Short answer

A business needs a tax audit if its turnover exceeds ₹1 crore, or ₹10 crore where cash receipts and cash payments are each within 5% of the total. A profession needs one if gross receipts exceed ₹50 lakh. Presumptive taxpayers who declare lower income than the scheme allows, and whose income exceeds the basic exemption limit, also need an audit. The report is due by 30 September.

The limits

Who	Tax audit needed when
Business	Turnover or gross receipts above ₹1 crore
Business with little cash	Above ₹10 crore, if cash receipts are not more than 5% of total receipts and cash payments are not more than 5% of total payments
Profession (doctor, lawyer, architect, consultant and others)	Gross receipts above ₹50 lakh
Presumptive taxpayer (section 58, formerly 44AD, 44ADA, 44AE)	Declares income below the presumptive rate and total income exceeds the basic exemption limit
Section 44AD lock-in (now section 58)	Opted out within five years of opting in, and income exceeds the basic exemption limit

For the 5% test, a cheque or draft that is not account-payee counts as cash.

Dates and forms

Audit report: by 30 September after the end of the tax year, one month before the return is due.
Return: by 31 October for audit cases.
Form: Forms 3CA/3CB with 3CD under the 1961 Act; Form 26 under the Income-tax Rules, 2026. The report is uploaded by the Chartered Accountant and accepted by the taxpayer on the e-filing portal.

Form 3CA (now the matching part of Form 26) is used when the accounts are already audited under another law, such as the Companies Act; otherwise Form 3CB (also now part of Form 26) is used.

Penalty

Failing to get the accounts audited, or to furnish the report, attracts a penalty of 0.5% of turnover or gross receipts, up to ₹1.5 lakh, unless there was a reasonable cause (section 271B of the 1961 Act; under the 2025 Act it is a fee under section 428).

Practical points

Turnover means the turnover of the business, not total income. GST collected is not part of turnover if the books show it separately.
Sale of a capital asset is not turnover.
If you have both a business and a profession, test each against its own limit.
A Chartered Accountant can sign a limited number of tax audit reports a year under ICAI's guidelines, so book the audit early.

Legal basis

Section 44AB, Income-tax Act, 1961, now section 63, Income-tax Act, 2025
Forms 3CA, 3CB and 3CD, now Form 26 under the Income-tax Rules, 2026

Official sources

By CA Ameesh Gupta, FCA, DISA (ICAI) | Last reviewed: 8 November 2026. General information, not advice on your facts: the law changes and outcomes depend on the details of each case.