Tax Audit & Presumptive Taxation FY 2024-25 (AY 2025-26) | Sections 44AA, 44AB, 44AD, 44ADA Explained
If you're a business owner or a professional, staying on top of Tax Audit and Presumptive Taxation requirements is essential for ensuring compliance with the Income Tax laws in India. These provisions simplify the tax filing process and help you understand what you need to report, saving you from penalties down the road.
In this blog, we’re going to walk you through the key provisions for FY 2024-25 (AY 2025-26), including Tax Audit under Sections 44AA, 44AB, and Presumptive Taxation under Sections 44AD and 44ADA, as well as the reporting requirements under Sections 269SS & 269T.
TAX AUDIT
Tax Audit is like a financial check-up for your business, conducted by a Chartered Accountant (CA). It ensures that your financial records are in order, and you’re following all the tax rules correctly. If your turnover exceeds certain limits, you’ll need to undergo a tax audit, and the results are reported in Form 3CD.
PRESUMPTIVE TAXATION
Presumptive Taxation, on the other hand, is a much simpler way of calculating your tax if your business is small and doesn’t want to deal with the complexity of maintaining detailed books of accounts. Instead of figuring out every single expense and income, you just declare a presumed income based on a fixed percentage of your turnover.
IN CASE OF INCOME FROM BUSINESS
APPLICABILITY FOR RESIDENT INDIVIDUAL/HUF/PARTNERSHIP (NOT LLP)
TOTAL SALES, TURNOVER OR GROSS RECEIPTS AMOUNT MAINTENANCE OF ACCOUNTS
(SECTION 44AA) AUDIT OF ACCOUNTS
(SECTION 44AB) PRESUMPTIVE BUSINESS INCOME
(SECTION 44AD) Up to ₹25,00,000 Not Applicable Not Applicable Can Opt if profit ≥ 8%/6% ₹25 Lakh - ₹1 Crore Applicable (Unless opted for 44AD) Not Applicable Can Opt if profit ≥ 8%/6% ₹1 Crore - ₹2 Crore Applicable (Unless opted for 44AD) Applicable (Unless opted for 44AD) or (unless receipts & payments in cash does not exceed 5%) Can Opt if profit ≥ 8%/6% ₹2 Crore- ₹ 3 Crore Applicable (Unless opted for 44AD) Applicable (Unless opted for 44AD) or (unless receipts & payments in cash does not exceed 5%) Can Opt if profit ≥ 8%/6% and Receipts in Cash does not exceed 5% ₹3 Crore - ₹10 Crore Applicable (Mandatory Application) Applicable (Unless receipts & payments in cash does not exceed 5%) Not Applicable (As turnover exceeds 3 crore) Above ₹10 Crore Applicable (Mandatory Application) Applicable (Mandatory Application) Not Applicable (As turnover exceeds 3 crore)
- In case of Partnership Firm, Section 44AA would be applicable if turnover exceeds ₹10 Lakh
- The payment or receipt, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be in cash
- The receipt, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be receipt in cash
- 6% if total turnover or gross receipts received by account payee cheque or account payee bank draft or use of ECS through a bank account or other electronic methods during previous year or on or before the due date specified u/s 139(1)
Other electronic modes prescribed under Rule 6ABBA includes Credit Cards, Debit Cards, Net Banking, IMPS, UPI, RTGS, NEFT and BHIM.
NON-APPLICABILITY OF SECTION 44AD
- Person earning commission income
- Person carrying agency business
- Person carrying on profession prescribed u/s 44AA(1)
- Business of plying, hiring or leasing goods carriages referred to in Section 44AE
(Only Resident Individual, Hindu undivided family or a Partnership firm (not LLP) are eligible)
APPLICABILITY FOR OTHER THAN INDIVIDUAL/HUF/PARTNERSHIP FIRM
TOTAL SALES, TURNOVER OR GROSS RECEIPTS AMOUNT MAINTENANCE OF ACCOUNTS (SECTION 44AA) AUDIT OF ACCOUNTS (SECTION 44AB) Up to ₹10 Lakh Not Applicable Not Applicable ₹10 Lakh - ₹1 Crore Mandatory Application Not Applicable ₹1 Crore - ₹10 Crore Mandatory Application Applicable (Unless receipts & payments in cash does not exceed 5%) Above ₹10 Crore Mandatory Application Mandatory Application
- If income from business exceeds ₹1,20,000, Section 44AA would be Applicable
- The payment or receipt, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be in cash
In this blog, we’re going to walk you through the key provisions for FY 2024-25 (AY 2025-26), including Tax Audit under Sections 44AA, 44AB, and Presumptive Taxation under Sections 44AD and 44ADA, as well as the reporting requirements under Sections 269SS & 269T.
TAX AUDIT
PRESUMPTIVE TAXATION
| TOTAL SALES, TURNOVER OR GROSS RECEIPTS AMOUNT | MAINTENANCE OF ACCOUNTS (SECTION 44AA) | AUDIT OF ACCOUNTS (SECTION 44AB) | PRESUMPTIVE BUSINESS INCOME (SECTION 44AD) |
| Up to ₹25,00,000 | Not Applicable | Not Applicable | Can Opt if profit ≥ 8%/6% |
| ₹25 Lakh - ₹1 Crore | Applicable (Unless opted for 44AD) | Not Applicable | Can Opt if profit ≥ 8%/6% |
| ₹1 Crore - ₹2 Crore | Applicable (Unless opted for 44AD) | Applicable (Unless opted for 44AD) or (unless receipts & payments in cash does not exceed 5%) | Can Opt if profit ≥ 8%/6% |
| ₹2 Crore- ₹ 3 Crore | Applicable (Unless opted for 44AD) | Applicable (Unless opted for 44AD) or (unless receipts & payments in cash does not exceed 5%) | Can Opt if profit ≥ 8%/6% and Receipts in Cash does not exceed 5% |
| ₹3 Crore - ₹10 Crore | Applicable (Mandatory Application) | Applicable (Unless receipts & payments in cash does not exceed 5%) | Not Applicable (As turnover exceeds 3 crore) |
| Above ₹10 Crore | Applicable (Mandatory Application) | Applicable (Mandatory Application) | Not Applicable (As turnover exceeds 3 crore) |
- In case of Partnership Firm, Section 44AA would be applicable if turnover exceeds ₹10 Lakh
- The payment or receipt, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be in cash
- The receipt, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be receipt in cash
- 6% if total turnover or gross receipts received by account payee cheque or account payee bank draft or use of ECS through a bank account or other electronic methods during previous year or on or before the due date specified u/s 139(1) Other electronic modes prescribed under Rule 6ABBA includes Credit Cards, Debit Cards, Net Banking, IMPS, UPI, RTGS, NEFT and BHIM.
NON-APPLICABILITY OF SECTION 44AD
- Person earning commission income
- Person carrying agency business
- Person carrying on profession prescribed u/s 44AA(1)
- Business of plying, hiring or leasing goods carriages referred to in Section 44AE
(Only Resident Individual, Hindu undivided family or a Partnership firm (not LLP) are eligible)
| TOTAL SALES, TURNOVER OR GROSS RECEIPTS AMOUNT | MAINTENANCE OF ACCOUNTS (SECTION 44AA) | AUDIT OF ACCOUNTS (SECTION 44AB) |
| Up to ₹10 Lakh | Not Applicable | Not Applicable |
| ₹10 Lakh - ₹1 Crore | Mandatory Application | Not Applicable |
| ₹1 Crore - ₹10 Crore | Mandatory Application | Applicable (Unless receipts & payments in cash does not exceed 5%) |
| Above ₹10 Crore | Mandatory Application | Mandatory Application |
- If income from business exceeds ₹1,20,000, Section 44AA would be Applicable
- The payment or receipt, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be in cash
IN CASE OF INCOME FROM PROFESSION
APPLICABILITY FOR INDIVIDUAL/ PARTNERSHIP FIRM (NOT LLP)
Assessee is engaged in legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration
| GROSS RECEIPTS AMOUNT | MAINTENANCE OF ACCOUNTS (SECTION 44AA) | AUDIT OF ACCOUNTS (SECTION 44AB) | PRESUMPTIVE INCOME FROM PROFESSION (SECTION 44ADA) |
| Up to ₹50 Lakh | Applicable (Not Applicable if opt for 44ADA) | Not Applicable (Applicable if profit below 50% and Total Income exceeds Basic exemption limit) | Can Opt if Profit is ≥ 50% |
| ₹50 Lakh - ₹75 Lakh | Applicable (Not Applicable if opt for 44ADA) | Applicable (Not Applicable if opt for 44ADA) | Can Opt if Profit is ≥ 50% and receipts in cash does not exceed 5% |
| Above ₹75 Lakh | Applicable | Mandatory Application | Not Applicable |
- The receipt, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be receipt in cash
- Only Resident Individual or a Partnership firm (not LLP) engaged in profession specified u/s 44AA(1) can opt for Section 44ADA
APPLICABILITY FOR INDIVIDUAL/ HUF
Assessee is NOT engaged in legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration
| GROSS RECEIPTS AMOUNT | MAINTENANCE OF ACCOUNTS (SECTION 44AA) | AUDIT OF ACCOUNTS (SECTION 44AB) |
| Up to ₹25 Lakh | Not Applicable | Not Applicable |
| ₹25 Lakh - ₹50 Lakh | Mandatory Application | Not Applicable |
| Above ₹50 lakh | Mandatory Application | Mandatory Application |
- In case Income from Profession exceeds ₹2,50,000, Section 44AA would be Applicable
APPLICABILITY FOR OTHER THAN INDIVIDUAL/HUF
Assessee is NOT engaged in legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration
| GROSS RECEIPTS AMOUNT | MAINTENANCE OF ACCOUNTS (SECTION 44AA) | AUDIT OF ACCOUNTS (SECTION 44AB) |
| Up to ₹10 Lakh | Not Applicable | Not Applicable |
| ₹10 Lakh - ₹50 Lakh | Mandatory Application | Not Applicable |
| Above ₹50 lakh | Mandatory Application | Mandatory Application |
- In case income from Profession exceeds ₹1,20,000, Section 44AA would be Applicable
REPORTING UNDER SECTIONS 269SS & 269T – FORM 3CD
Under a Tax Audit, the Chartered Accountant is required to report any cash transactions involving loans, deposits, or specified sums that violate limits set by Sections 269SS and 269T. These details are reported in Form 3CD.
SECTION 269SS- MODE OF TAKING OR ACCEPTING CERTAIN LOANS, DEPOSITS AND SPECIFIED SUM.
This section prohibits any person from accepting loans, deposits, or certain advances related to immovable property (called specified sum) of ₹20,000 or more in cash.
Permissible modes are:
Illustration:
This section prohibits any person from accepting loans, deposits, or certain advances related to immovable property (called specified sum) of ₹20,000 or more in cash.
Permissible modes are:
- Account payee cheque
- Account payee bank draft
- Electronic Clearing system
- Prescribed digital modes (UPI, NEFT, RTGS, IMPS, etc.)
Illustration:
| Date | Name | Loan Accepted | Loan Repaid | Opening is Nil |
| 01/06/2024 | Deep | 45,000 | 0 | Closing is 45,000 |
| Here reporting u/s 269SS is required as the amount exceeds ₹20,000 | ||||
SECTION 269T- MODE OF REPAYMENT OF CERTAIN LOANS OR DEPOSITS
This section prohibits the repayment of any loan, deposit or specified advance against property of ₹20,000 or more in cash.
Repayment must be done via:
- Account payee cheque
- Account payee bank draft
- Electronic or other prescribed digital modes
Illustration:
| Date | Name | Loan Accepted | Loan Repaid | Opening 40,000 |
| 01/06/2024 | Pallav | 70,000 | Balance is 1,10,000 | |
| 15/06/2024 | Pallav | 30,000 | Closing is 80,000 | |
| Here reporting u/s 269SS and 269T is required as the amount exceeds ₹20,000 | ||||
FORM 3CD
Form 3CD is a detailed audit report annexure required to be filed by a Chartered Accountant when a taxpayer undergoes a tax audit under Section 44AB of the Income Tax Act, 1961. It contains specific disclosures which include turnover, deductions, TDS compliance, and cash transactions under Sections 269SS and 269T. The audit report (Form 3CA/3CB along with Form 3CD) must be furnished on or before 30th of September, as the due date for filing the income tax return is 31st October of the relevant assessment year.
Understanding the requirements of Tax Audit and Presumptive Taxation for FY 2024-25 is crucial for businesses and professionals to ensure compliance and avoid penalties. By utilizing Presumptive Taxation, small businesses and professionals can simplify their tax filing process, while a Tax Audit ensures accurate reporting.
File your Income Tax Return accurately and on time to stay compliant, claim refunds, and avoid penalties with ease.
Let our experts handle the complexities while you focus on your business.
Let our experts handle the complexities while you focus on your business.
DISCLAIMER
The information contained in this document is prepared by R.J. Soni & Associates and TaxOSmart LLP (hereinafter referred to as RJSA) for information purpose only. It does not constitute any legal advice or tax advice. In no way, this document should be treated as a marketing material or efforts to solicit a client. While we have made every attempt to ensure that the information contained in this document is true, RJSA, its partners and/or any of its employees make no claims / guarantee about its accuracy, completeness, or up-to-date character, or warranty, express or implied, including the warranty of opinions expressed for a particular purpose, or assume any liability or responsibility for the accuracy, completeness, or usefulness of any information available from this document.
The information contained in this document is prepared by R.J. Soni & Associates and TaxOSmart LLP (hereinafter referred to as RJSA) for information purpose only. It does not constitute any legal advice or tax advice. In no way, this document should be treated as a marketing material or efforts to solicit a client. While we have made every attempt to ensure that the information contained in this document is true, RJSA, its partners and/or any of its employees make no claims / guarantee about its accuracy, completeness, or up-to-date character, or warranty, express or implied, including the warranty of opinions expressed for a particular purpose, or assume any liability or responsibility for the accuracy, completeness, or usefulness of any information available from this document.
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