Section 44AB – Business vs Profession Audit Thresholds Explained
A common query in tax audit compliance is whether the third proviso to Section 44AB (₹10 crore turnover with 5% cash limit) applies to professionals under clause (b)(2).
1. Clause (a) – Business
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Standard threshold: Audit required if turnover exceeds ₹1 crore.
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Enhanced threshold (Third Proviso): Turnover up to ₹10 crores exempted from audit if both cash receipts and cash payments do not exceed 5% of the respective totals.
2. Clause (b)(2) – Profession
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Flat threshold: Audit required if gross receipts exceed ₹50 lakhs.
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No enhanced threshold: The third proviso under clause (a) does not apply.
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All receipts count: Cash or digital receipts are fully counted toward the ₹50 lakh limit.
3. Legislative Intent
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The law intentionally differentiates business and profession.
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Cash-limit and digitisation relaxations under the third proviso are aimed at businesses, not professional entities.
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Professionals operate under a stricter, fixed audit trigger reflecting smaller-scale operations.
4. Key Takeaways
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Businesses: Can benefit from the ₹10 crore turnover limit if digital transactions are ≥95%.
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Professionals: Cannot avail any enhanced limit; ₹50 lakh gross receipts remain the sole audit trigger.
Conclusion
Audit applicability under Section 44AB is distinctly treated for business and profession:
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Clause (a) with third proviso = flexible, cash-limit relaxation.
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Clause (b)(2) = fixed threshold, no proviso benefits.
Professionals must monitor the ₹50 lakh receipts limit, irrespective of digital compliance.
