Tax Audit Provisions for AY 2026–27: Section 44AB Explained

Tax Audit under Section 44AB continues to be a critical compliance requirement for businesses and professionals. For Assessment Year 2026–27, taxpayers must carefully assess audit applicability, reporting obligations, and statutory disclosures to avoid penalties and litigation.

Applicability of Tax Audit

Tax audit is mandatory where business turnover exceeds ₹1 crore or where professional gross receipts exceed ₹50 lakhs during the financial year.

Enhanced Threshold of ₹10 Crore for Businesses

The tax audit limit for businesses is increased to ₹10 crore if cash receipts do not exceed 5 percent of total receipts and cash payments do not exceed 5 percent of total payments.

Tax Audit for Professionals

Professionals are not eligible for the enhanced threshold. The tax audit limit for professionals remains ₹50 lakhs, irrespective of the mode of transactions.

Due Date of Tax Audit Report

The due date for filing the tax audit report is 30th September of the relevant assessment year, subject to extensions notified by the tax authorities.

Tax Audit Report Forms

• Form 3CA along with Form 3CD where accounts are audited under any other law
• Form 3CB along with Form 3CD where accounts are not audited under any other law

Clause 44 – GST Turnover Reconciliation

Clause 44 requires reconciliation between total turnover and GST turnover, including exempt, nil-rated, and non-GST supplies. This clause is closely scrutinised by tax authorities.

Reporting of Cash Transactions

Auditors must report cash receipts and payments and ensure compliance with Sections 269SS, 269T, and 40A(3).

Disallowances under Sections 40(a) and 43B

Non-compliance relating to TDS, TCS, and delayed payment of statutory dues must be reported, which may result in disallowance of expenses.

Depreciation Reporting

Depreciation must be disclosed as per the Income-tax Act on a block-wise basis, including additions, deletions, and differences compared to books of accounts.

Presumptive Taxation and Audit Trigger

Tax audit becomes applicable if an assessee opts out of presumptive taxation or declares income lower than the prescribed presumptive rate.

Related Party Transactions

Payments made to specified persons under Section 40A(2)(b) must be reported to ensure they are not excessive or unreasonable.

Loans, Deposits and Advances

Acceptance or repayment of loans and deposits must comply with Sections 269SS and 269T and requires detailed reporting in the audit report.

Inventory Valuation – Section 145A

The method of inventory valuation and inclusion of taxes, duties, cess, and fees must be clearly disclosed.

ICDS Compliance

The auditor is required to certify compliance with Income Computation and Disclosure Standards and report any resulting profit adjustments.

Penalty for Non-Compliance

Conclusion

Tax Audit under Section 44AB for AY 2026–27 demands increased accuracy, documentation, and proactive compliance. Businesses and professionals should regularly review their transactions and disclosures to ensure a smooth audit process and avoid penalties.