AY 2026-27 Tax Audit Guide Focuses on Sections 44AB, 44AD and 44ADA
A guide published on 12 August 2026 by a professional portal brought three provisions of the Income-tax Act, 1961 into one compliance question for Assessment Year 2026-27: when does a business or professional need a tax audit under Section 44AB, and how do the presumptive schemes in Sections 44AD and 44ADA change that answer? The guide was an explainer, not a notification, circular or amendment. The limits it discusses come from the statute, and this report sets them out from the text published by the Income Tax Department.
AY 2026-27 corresponds to the previous year 2025-26 (1 April 2025 to 31 March 2026). The Income-tax Act, 2025 has applied from 1 April 2026, but audits for this year are still governed by the 1961 Act. The Department's Form No. 26 FAQs state that Forms 3CA, 3CB and 3CD continue for tax audits for previous years relevant to assessment years up to 2026-27.
Section 44AB limits for AY 2026-27
Under Section 44AB of the Income-tax Act, 1961, a person carrying on business must get accounts audited if total sales, turnover or gross receipts in business exceed Rs 1 crore in the previous year. The limit becomes Rs 10 crore where cash receipts do not exceed 5% of total receipts and cash payments do not exceed 5% of total payments. For this test, a cheque or bank draft that is not account payee is treated as cash.
A person carrying on a profession must get accounts audited if gross receipts in the profession exceed Rs 50 lakh. Audit also applies where a person claims profits lower than the deemed profits under Sections 44AE, 44BB or 44BBB, and in the presumptive cases described below. Section 44AB itself provides that it does not apply to a person who declares profits for the year in accordance with Section 44AD(1) or Section 44ADA(1).
| Situation (AY 2026-27) | Audit limit |
|---|---|
| Business, general case | Turnover above Rs 1 crore |
| Business, cash receipts and cash payments each within 5% | Turnover above Rs 10 crore |
| Profession, not opting for Section 44ADA | Gross receipts above Rs 50 lakh |
| Section 44AD business declaring presumptive income | No Section 44AB audit while turnover is within Rs 2 crore (Rs 3 crore if cash receipts are within 5%) |
| Section 44ADA professional declaring presumptive income | No Section 44AB audit while receipts are within Rs 50 lakh (Rs 75 lakh if cash receipts are within 5%) |
Where Section 44AD fits
Section 44AD deems profit of an eligible business at 8% of total turnover or gross receipts, or 6% of the amount received through account payee cheques, bank drafts or electronic modes, or a higher amount claimed. An eligible business is one whose turnover does not exceed Rs 2 crore. The limit is Rs 3 crore where cash receipts do not exceed 5% of turnover.
The scheme has a lock-in. Under Section 44AD(4), an assessee who declares profit for any year not in accordance with sub-section (1) cannot claim the scheme for the next five assessment years. Under Section 44AD(5), such an assessee whose total income exceeds the basic exemption limit must maintain books of account and get them audited. This is the audit trigger that most often catches small traders who switch in and out of the scheme.
Where Section 44ADA fits
Section 44ADA applies to a resident individual or a partnership firm (other than an LLP) engaged in a profession referred to in Section 44AA(1). Profit is deemed at 50% of gross receipts, or a higher amount claimed. The receipt limit is Rs 50 lakh, raised to Rs 75 lakh where cash receipts do not exceed 5% of gross receipts. A professional with receipts between Rs 50 lakh and Rs 75 lakh who meets the cash condition and declares 50% profit therefore does not need a Section 44AB audit. One who declares lower profit and whose total income exceeds the basic exemption limit must maintain books and get them audited.
Due date and forms
The audit report must be furnished before the "specified date", which Section 44AB defines as one month before the due date for filing the return under Section 139(1). Where the return is due on 31 October, the report is due by 30 September. For AY 2026-27 the report is given in Form 3CA or 3CB with the statement of particulars in Form 3CD.
What changes from tax year 2026-27
From tax year 2026-27, tax audit moves to Section 63 of the Income-tax Act, 2025. It keeps the same thresholds: Rs 1 crore for business (Rs 10 crore where cash receipts and payments are each within 5%) and Rs 50 lakh for professions. The presumptive schemes are now in Sections 58 and 61, and Section 63(2) exempts a person who declares profits in line with Section 58(2) or 61(2). The "specified date" is one month before the return due date under Section 263(1). The audit report will be given in the new Form No. 26 under Rule 47 of the Income-tax Rules, 2026, which the FAQs say applies to tax years starting on or after 1 April 2026.
What to do now
- Fix the provision first: business or profession, and whether the taxpayer is declaring income under Section 44AD or 44ADA.
- Test the 5% cash condition from the books, counting non account payee cheques and drafts as cash.
- For Section 44AD clients, check the history of the last five years for any opt-out that triggers the lock-in and Section 44AD(5) audit.
- Reconcile turnover used for the threshold test with the books, GST returns and the figures that will go into the return.
- Keep in mind that engagements for tax year 2026-27 onward will use Section 63 and Form No. 26, not Forms 3CA, 3CB and 3CD.
Updated on 27 September 2026: added the statutory audit limits, the Section 44AD and 44ADA thresholds and lock-in rules, the due date and the tax year 2026-27 position under Section 63 of the Income-tax Act, 2025, with links to the Income Tax Department's text.
