π Tax Audit Requirement in India for FY 2024-25 (AY 2025-26)
A tax audit ensures transparency in income reporting and compliance with the Income Tax Act, 1961. Whether you are a business owner, professional, or company, knowing the audit thresholds can save you from penalties and last-minute stress.
This article explains the provisions under Sections 44AA, 44AB, 44AD, and 44ADA applicable for Financial Year 2024-25 (Assessment Year 2025-26).
π What Is a Tax Audit?
A tax audit (u/s 44AB) is the examination of the books of accounts of a taxpayer by a Chartered Accountant (CA) to verify:
- βοΈ Correctness of declared income.
- βοΈ Compliance with accounting standards and tax law.
βοΈ Note: Tax Audit β Statutory Audit
- Statutory audit is compulsory for Companies and LLPs under the Companies Act, irrespective of turnover.
- Tax audit is conditional and applies only if thresholds are crossed.
π Section 44AA: Maintenance of Books of Accounts
Not everyone needs a tax audit, but maintenance of books is mandatory above certain limits.
β FY 2024-25 Thresholds:
- Business: Turnover > βΉ1 crore.
- Professionals (doctors, lawyers, architects, CAs, engineers, etc.): Gross receipts > βΉ75 lakh.
π Key Point: Even if a tax audit is not required, you may still need to maintain books under this section.
π¦ Section 44AD: Presumptive Taxation Scheme (PTS) for Businesses
This scheme reduces compliance burden for small businesses.
π₯ Eligible: Resident Individuals, HUFs, Partnership Firms (except LLPs).
π Turnover Limits:
- Up to βΉ2 crore (general).
- Up to βΉ3 crore if 95%+ transactions are digital.
π° Presumptive Profits:
- 8% of turnover (cash transactions).
- 6% of turnover (digital transactions).
π« No Audit Required If: Declared profits are β₯ 8% / 6%, as applicable.
β οΈ Audit Mandatory If:
- Declared profits are lower than 8%/6%, AND total income > basic exemption (βΉ2.5 lakh).
- You opted out of presumptive scheme in any of the last 5 years.
βοΈ Section 44ADA: Presumptive Taxation for Professionals
Simplified taxation for specified professionals.
π₯ Eligible: Doctors, Lawyers, Architects, Accountants, Technical Consultants, etc.
π Turnover Limit (FY 2024-25): Up to βΉ75 lakh (if 95%+ digital). (Earlier limit was βΉ50 lakh.)
π° Presumptive Profits: 50% of gross receipts.
π« No Audit Required If: Declared income = 50% or more.
β οΈ Audit Mandatory If: Income declared < 50% of gross receipts AND total income > exemption limit.
π Section 44AB: Tax Audit Requirements for Non-Presumptive Taxation (Non-PTS)
This section applies when taxpayers do not use presumptive schemes (44AD/44ADA).
Business Turnover (FY 2024-25) | Condition on Cash Transactions | Audit Requirement |
---|---|---|
Up to βΉ1 crore | Any % | β No audit required |
βΉ1 crore β βΉ10 crore | Cash receipts or payments > 5% | β Audit required |
βΉ1 crore β βΉ10 crore | Cash receipts + payments β€ 5% | β No audit required |
Above βΉ10 crore | Any % | β Audit mandatory |
β οΈ Important Clarifications:
- Earlier, audit was compulsory above βΉ1 crore. Now, relief is given up to βΉ10 crore turnover if cash transactions are β€ 5%.
- If cash transactions > 5%, tax audit is required even between βΉ1β10 crore.
- Above βΉ10 crore, audit is always mandatory.
π Special Situations
- Opting Out of Presumptive Scheme (44AD): If you exit within 5 years, you must maintain books + get an audit if income > exemption limit.
- Business Loss (Non-PTS): If turnover > βΉ1 crore and loss declared β Audit required.
- F&O Trading: Futures & Options are treated as business income. If turnover exceeds βΉ2 crore (or loss declared beyond limits) β Tax audit applies.
- Companies & LLPs: Always require statutory audit under company law. Tax audit applies only if Section 44AB thresholds are crossed.
π Summary Table: Who Needs Tax Audit in FY 2024-25?
Category | Turnover Limit | Condition | Audit Required? |
---|---|---|---|
Business (Non-PTS) | β€ βΉ1 crore | Any | β No |
Business (Non-PTS) | βΉ1 β 10 crore | Cash > 5% | β Yes |
Business (Non-PTS) | βΉ1 β 10 crore | Cash β€ 5% | β No |
Business (Non-PTS) | > βΉ10 crore | Any | β Yes |
Presumptive Business (44AD) | β€ βΉ2 crore (general) / β€ βΉ3 crore (95% digital) | Profit β₯ 8%/6% | β No |
Presumptive Business (44AD) | Same | Profit < 8%/6% & income > exemption & opted out in last 5 yrs | β Yes |
Presumptive Professionals (44ADA) | β€ βΉ75 lakh (95% digital) | Income β₯ 50% | β No |
Presumptive Professionals (44ADA) | Same | Income < 50% & > exemption | β Yes |
Professionals (Non-PTS) | > βΉ75 lakh | Any | β Yes |
Companies / LLPs | Any turnover | Statutory audit required (Tax audit depends on turnover rules) | β Statutory, conditional Tax audit |
π Conclusion
- For Businesses: Tax audit mainly depends on turnover and % of cash transactions.
- For Professionals: Audit depends on turnover and % of income declared.
- For Presumptive Scheme Users: Audit applies only if profits declared are lower than deemed % and income exceeds exemption.
- For Companies & LLPs: Statutory audit is always compulsory; tax audit depends on turnover rules.
π Tax Audit Applicability Flowchart (FY 2024-25 | AY 2025-26)
1οΈβ£ Businesses (Non-Presumptive)
- Turnover β€ βΉ1 crore β β No Audit
- Turnover βΉ1β10 crore β
- If Cash > 5% β β Audit Required
- If Cash β€ 5% β β No Audit
- Turnover > βΉ10 crore β β Audit Mandatory
2οΈβ£ Businesses under Presumptive Scheme (44AD)
- Turnover β€ βΉ2 crore (or β€ βΉ3 crore with 95%+ digital) β
- If Profit β₯ 8% (cash) / 6% (digital) β β No Audit
- If Profit < 8%/6% & Income > exemption & opted out in last 5 yrs β β Audit Required
3οΈβ£ Professionals under Presumptive Scheme (44ADA)
- Turnover β€ βΉ75 lakh (95%+ digital) β
- If Income β₯ 50% of receipts β β No Audit
- If Income < 50% & > exemption limit β β Audit Required
- Turnover > βΉ75 lakh β β Audit Mandatory
4οΈβ£ Companies & LLPs
- Statutory Audit Mandatory
- Tax Audit u/s 44AB β Depends on turnover rules (same as businesses)
π‘ Pro Tip: Stay under 5% cash transactions to reduce compliance burden. Always consult a Chartered Accountant before filing returns.