Partnership tax audit query

The partnership has an annual turnover of ₹1.44 crore and a profit of ₹5,76,000 (5% of total turnover); it maintains books of accounts, all transactions are conducted via digital payments, and it is set to file ITR-5. The query is whether a tax audit is mandatory for the partnership?

Replies (1)

No mandatory audit here. Here is why.

Since all receipts and payments are digital (cash below 5%), the Section 44AB(a) audit threshold rises from Rs 1 crore to Rs 10 CRORE. At Rs 1.44 crore turnover, you are well under that limit.

You now have two paths:

Section 44AD (presumptive taxation):
- Available for partnerships with business turnover up to Rs 2 crore
- Declare 6% of turnover as profit for 100% digital receipts = Rs 8.64 lakh
- No books of accounts required, no audit required
- ITR-5 with 44AD selected

Actual profit route:
- Show actual Rs 5.76 lakh profit and maintain full books under Section 44AA
- No audit under 44AB(a) since turnover is below Rs 10 crore
- Higher scrutiny risk since 5.76 lakh is below 6% of turnover

If the firm has no other complexities (business income, not professional), Section 44AD at 6% is the cleaner route for AY 2026-27.

This [tax audit applicability guide for AY 2026-27](https://taxgarden.in/blog/due-date-filing-tax-audit-report-section-44ab-india-2026) covers the Rs 10 crore digital limit and 44AD vs actual books comparison.

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