📘 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).
🔎 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:
- ✔️ Correctness of declared income.
- ✔️ Compliance with accounting standards and tax law.
⚖️ Note: Tax Audit ≠ 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.
📑 Section 44AA: Maintenance of Books of Accounts
Not everyone needs a tax audit, but maintenance of books is mandatory above certain limits.
✅ FY 2024-25 Thresholds:
- Business: Turnover > ₹1 crore.
- Professionals (doctors, lawyers, architects, CAs, engineers, etc.): Gross receipts > ₹75 lakh.
📌 Key Point: Even if a tax audit is not required, you may still need to maintain books under this section.
📦 Section 44AD: Presumptive Taxation Scheme (PTS) for Businesses
This scheme reduces compliance burden for small businesses.
👥 Eligible: Resident Individuals, HUFs, Partnership Firms (except LLPs).
📊 Turnover Limits:
- Up to ₹2 crore (general).
- Up to ₹3 crore if 95%+ transactions are digital.
💰 Presumptive Profits:
- 8% of turnover (cash transactions).
- 6% of turnover (digital transactions).
🚫 No Audit Required If: Declared profits are ≥ 8% / 6%, as applicable.
⚠️ Audit Mandatory If:
- Declared profits are lower than 8%/6%, AND total income > basic exemption (₹2.5 lakh).
- You opted out of presumptive scheme in any of the last 5 years.
⚖️ Section 44ADA: Presumptive Taxation for Professionals
Simplified taxation for specified professionals.
👥 Eligible: Doctors, Lawyers, Architects, Accountants, Technical Consultants, etc.
📊 Turnover Limit (FY 2024-25): Up to ₹75 lakh (if 95%+ digital). (Earlier limit was ₹50 lakh.)
💰 Presumptive Profits: 50% of gross receipts.
🚫 No Audit Required If: Declared income = 50% or more.
⚠️ Audit Mandatory If: Income declared < 50% of gross receipts AND total income > exemption limit.
📋 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 ₹1 crore | Any % | ❌ No audit required |
| ₹1 crore – ₹10 crore | Cash receipts or payments > 5% | ✅ Audit required |
| ₹1 crore – ₹10 crore | Cash receipts + payments ≤ 5% | ❌ No audit required |
| Above ₹10 crore | Any % | ✅ Audit mandatory |
⚠️ Important Clarifications:
- Earlier, audit was compulsory above ₹1 crore. Now, relief is given up to ₹10 crore turnover if cash transactions are ≤ 5%.
- If cash transactions > 5%, tax audit is required even between ₹1–10 crore.
- Above ₹10 crore, audit is always mandatory.
📌 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 > ₹1 crore and loss declared → Audit required.
- F&O Trading: Futures & Options are treated as business income. If turnover exceeds ₹2 crore (or loss declared beyond limits) → Tax audit applies.
- Companies & LLPs: Always require statutory audit under company law. Tax audit applies only if Section 44AB thresholds are crossed.
📊 Summary Table: Who Needs Tax Audit in FY 2024-25?
| Category | Turnover Limit | Condition | Audit Required? |
|---|---|---|---|
| Business (Non-PTS) | ≤ ₹1 crore | Any | ❌ No |
| Business (Non-PTS) | ₹1 – 10 crore | Cash > 5% | ✅ Yes |
| Business (Non-PTS) | ₹1 – 10 crore | Cash ≤ 5% | ❌ No |
| Business (Non-PTS) | > ₹10 crore | Any | ✅ Yes |
| Presumptive Business (44AD) | ≤ ₹2 crore (general) / ≤ ₹3 crore (95% digital) | Profit ≥ 8%/6% | ❌ No |
| Presumptive Business (44AD) | Same | Profit < 8%/6% & income > exemption & opted out in last 5 yrs | ✅ Yes |
| Presumptive Professionals (44ADA) | ≤ ₹75 lakh (95% digital) | Income ≥ 50% | ❌ No |
| Presumptive Professionals (44ADA) | Same | Income < 50% & > exemption | ✅ Yes |
| Professionals (Non-PTS) | > ₹75 lakh | Any | ✅ Yes |
| Companies / LLPs | Any turnover | Statutory audit required (Tax audit depends on turnover rules) | ✅ Statutory, conditional Tax audit |
📝 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.
📊 Tax Audit Applicability Flowchart (FY 2024-25 | AY 2025-26)
1️⃣ Businesses (Non-Presumptive)
- Turnover ≤ ₹1 crore → ❌ No Audit
- Turnover ₹1–10 crore →
- If Cash > 5% → ✅ Audit Required
- If Cash ≤ 5% → ❌ No Audit
- Turnover > ₹10 crore → ✅ Audit Mandatory
2️⃣ Businesses under Presumptive Scheme (44AD)
- Turnover ≤ ₹2 crore (or ≤ ₹3 crore with 95%+ digital) →
- If Profit ≥ 8% (cash) / 6% (digital) → ❌ No Audit
- If Profit < 8%/6% & Income > exemption & opted out in last 5 yrs → ✅ Audit Required
3️⃣ Professionals under Presumptive Scheme (44ADA)
- Turnover ≤ ₹75 lakh (95%+ digital) →
- If Income ≥ 50% of receipts → ❌ No Audit
- If Income < 50% & > exemption limit → ✅ Audit Required
- Turnover > ₹75 lakh → ✅ Audit Mandatory
4️⃣ Companies & LLPs
- Statutory Audit Mandatory
- Tax Audit u/s 44AB → Depends on turnover rules (same as businesses)
💡 Pro Tip: Stay under 5% cash transactions to reduce compliance burden. Always consult a Chartered Accountant before filing returns.