Chartered Accountant · ICAI M.No. 153926 · FRN 136869W · Reviewed on 12 October 2026
Turnover is the first test
Section 44AB of the Income-tax Act, 1961 triggers on turnover, not profit: ₹1 crore for business — lifted to ₹10 crore where cash receipts and cash payments each stay within 5% of totals (true for most digital-first businesses) — and ₹50 lakh of gross receipts for a profession, with no cash relaxation (the ₹75 lakh figure professionals hear about is the section 44ADA ceiling, and anyone declaring under 44ADA is outside section 44AB altogether). A loss-making business above its limit still needs the audit; FY 2025-26 reports go in Form 3CA/3CB with 3CD by 30 September. From Tax Year 2026-27 the requirement continues under section 63 of the Income-tax Act, 2025.
The presumptive opt-out trap
Section 44AD(4) and (5): use presumptive taxation, then in a later year declare less than the deemed 8% (6% digital) — a loss included — and you are locked out of 44AD for five years; if your total income also exceeds the basic exemption, you must maintain books and get audited even with turnover far below ₹1 crore. Professionals under 44ADA face only half of it: declare below the 50% deemed rate with income above the exemption and section 44ADA(4) requires books and an audit for that year — but 44ADA has no five-year lockout. This is how small loss-declaring businesses get caught.
Traders: how F&O turnover is counted
For F&O, turnover is the sum of absolute profits and losses on trades (per the ICAI guidance note) — a trader with ₹40 lakh of gains and ₹45 lakh of losses has ₹85 lakh turnover and a net loss. Most retail F&O traders stay under the ₹10-crore digital limit, so audit usually turns on the presumptive-opt-out test, not turnover. Remember the separate point that decides real money: a loss carries forward only if the return is filed by the due date (sections 139(3) and 80).
A worked example
A trader with ₹90 lakh turnover declaring a small loss, other income above the exemption, after using 44AD last year — audit required. A salaried person with a ₹2 lakh share-trading loss and no business — no audit; file on time to carry the loss forward. The in-between cases are where it gets technical: our audit team can tell you in one sitting whether 44AB touches you.