Partnership tax audit query

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.

Two refinements: the Sec 44AD limit is Rs 3 crore, not Rs 2 crore, where cash receipts are within 5% (Finance Act, 2023), and the profit here is 4% of turnover, not 5%; since a firm has no basic exemption limit, if it opted for Sec 44AD in any of the preceding five years and now declares below 6%, Sec 44AD(4)/(5) makes a tax audit under Sec 44AB(e) compulsory.

On the facts stated, a tax audit is not mandatory solely because the partnership’s profit is 5% of turnover. For a business, the usual turnover threshold is ₹1 crore, increased to ₹10 crore where cash receipts and cash payments each do not exceed 5% of the relevant totals. At ₹1.44 crore, the partnership is below ₹10 crore if it meets both cash conditions. “All transactions are digital” should be checked against the statutory cash-receipt and cash-payment tests; filing ITR-5 does not itself determine audit applicability.

This determination fits into the year-end return and audit-compliance review. Manual checks across turnover, receipts, payments and return disclosures can be difficult; automation reduces repetitive work while keeping professional judgment in control. Our platform provides 2,000+ AI agents and 650+ integrations covering only relevant accounting, tax and compliance workflows. For a walkthrough tailored to your practice, message us on WhatsApp at https://wa.me/message/3HVOZ7HIY4ESC1.