Basic criteria for tax audit applicability
Under section 44AB of the Income Tax Act, companies are required to undergo a tax audit if their turnover or gross receipts exceed the specified threshold in a financial year. However, exemptions are available in specific cases.

• Companies with business turnover not exceeding ten crore rupees may be exempt
  
• For professionals, the limit is fifty lakh rupees of gross receipts
  
• Exemption depends on digital mode of receipt and payment
  
• Turnover should not include GST collected if accounted separately
  

Presumptive taxation and audit exemption
Companies are not eligible for presumptive taxation schemes under sections 44AD, 44ADA, or 44AE. These schemes are applicable only to individuals, HUFs, and partnership firms.

• Companies cannot opt for presumptive income to avoid tax audit
  
• Presumptive taxation is designed for small taxpayers and professionals
  
• Even if turnover is low, companies must follow regular tax provisions
  
• As a result, audit is based only on turnover and receipt thresholds
  

Use of digital transactions for exemption
To encourage digital payments, the audit turnover limit for businesses has been increased to ten crore rupees, provided a major portion of transactions is non-cash.

• At least ninety five percent of receipts must be through digital modes
  
• At least ninety five percent of payments must be through banking channels
  
• If this condition is not met, the threshold reduces to one crore rupees
  
• Companies with mostly cash transactions may not qualify for exemption
  

Applicability to companies with losses or no income
Even companies reporting a loss or nil income may be subject to audit if their turnover exceeds the applicable limits. Income level alone does not exempt a company.

• Loss-making companies must undergo audit if turnover is high
  
• Audit is compulsory for statutory and regulatory compliance
  
• Reporting capital loss or depreciation does not remove the requirement
  
• Exemption applies only when both turnover and other criteria are met
  

Statutory audit and tax audit distinction
Companies are also required to conduct a statutory audit under the Companies Act. This is separate from the tax audit under income tax law and does not affect exemption.

• Statutory audit is mandatory for all companies regardless of turnover
  
• Tax audit is dependent on turnover and tax-specific provisions
  
• Both audits may be conducted together but reported differently
  
• Tax audit requires reporting in Form 3CA and 3CD on the income tax portal
  

Assessment of exemption on a year-to-year basis
The applicability of tax audit is reviewed annually based on turnover and transaction modes. Exemption in one year does not automatically apply in the next.

• Companies must assess compliance with limits every financial year
  
• Maintain proper records to support digital transaction percentages
  
• Prepare financial statements and trial balance for audit checks
  
• Consult a tax advisor to verify eligibility and avoid non-compliance