ICAI Representation to CBDT Sparks Caution for SMEs and Freelancers Under Section 44AB

Introduction: ICAI Representation to CBDT Issues Warning for Freelancers and SMEs

We note the ICAI Representation to CBDT has raised fresh concerns for small and medium enterprises (SMEs) and freelancers about compliance under Section 44AB of the Income-tax Act. The message is clear: those who cross certain thresholds must audit their accounts or face penalties. Alongside this, many ask about H1-B for Freelancers and Tech SMEs, as cross-border work and US visas come into play. We lay out what the representation means, its effects on SMEs and freelancers, and answer your pressing questions.

What is Section 44AB and Why ICAI’s Representation Matters

What Section 44AB Requires

• Section 44AB mandates that certain persons with business turnover or gross receipts above specified limits must get their accounts audited by a Chartered Accountant.
• It triggers when turnover crosses Rs 1 crore (for business) or Rs 50-lakh (for specified professionals).
• The audit report must be filed in prescribed formats (Forms 3CA/3CB, and 3CD). Delay or non-compliance invites penalties.

What ICAI Representation to CBDT Demands

• ICAI has formally asked the CBDT to extend or align due dates for return filing and specified dates under Section 44AB, to reduce hardship for SMEs and freelancers.
• It highlighted delays in enabling ITR utilities (e-file software and forms) this year. Some forms like ITR-5, ITR-6, ITR-7 were issued later than usual. 
• ICAI also seeks fairness in aligning the "specified date" of audit compliance with return filing dates. SMEs and freelancers feel squeezed by tight timelines.

Key Updates from ICAI and CBDT on 44AB for 2025-26

Revised Forms and Guidance Note

• A new Guidance Note by ICAI under Section 44AB has been released for Assessment Year 2025-26. It includes updated clauses, new disclosure requirements, and changes in Form 3CD.
• These changes mean freelancers and SMEs must be more careful in how they track receipts, expenses, and disclosures for audit. (anptaxcorp)

Cap on Number of Audits per CA

• From April 1, 2026, each Chartered Accountant (in individual capacity or as partner in firms) will be limited to 60 tax audit assignments per financial year.
• However, this cap does not apply to audits under Sections 44AE, 44AD, 44ADA. (Caalley)

Policy & Deadline Relief Requests

• ICAI has requested the CBDT to adjust audit deadlines. For non-audit return filing, the deadline was moved from 31 July to 15 September 2025. But audit‐case deadlines (especially those under 44AB) remain on 31 October 2025.
• SMEs and freelancers are calling for matching shifts in “specified dates” under Section 44AB to give them more breathing space.

What These Changes Mean for SMEs and Freelancers

Greater Compliance Burden

• SMEs and freelancers must maintain accurate books, record digital transactions, and declare receipts properly.
• New audit clauses in Form 3CD require more detailed disclosures. Missing details may cause audits to fail or attract scrutiny.

Tighter Timelines and Risk of Penalties

• With audit deadlines unchanged, delays in ITR utility releases put SMEs and freelancers at risk.
• Penalties under Section 271B or other provisions may apply if books are not audited or submitted on time.

Cost Increases

• Hiring Chartered Accountants may cost more when the audit work increases in depth due to new disclosure checks.
• Technical time, tracking, record-keeping, and compliance tools may add to costs for small players.

Impact on Cross-Border Work: H1-B for Freelancers and Tech SMEs

• Though H1-B visas are a US immigration concept primarily for employees, tech freelancers or SMEs who serve US clients need clean tax records for eligibility and credibility.
• Clients in the US may ask for audited statements or proof of compliance. Non-audit, or weak documentation can harm contracting opportunities.
• Proper compliance under 44AB helps freelancers show stability, financial integrity, which can support visa-sponsorship cases or client trust.

Steps SMEs and Freelancers Should Take Now

Early Preparation

• Start collecting digital invoices, bank statements, expense bills now. Don’t wait for utility release.
• Use accounting software or hire regular bookkeeping help.

Consult Professionals

• Engage a CA early to understand clauses that apply to your case (whether business turnover, professional receipts, etc.).
• Clarify if you qualify under exemptions like 44ADA for professionals.

Keep Track of Utility Releases and Notifications

• Monitor CBDT notifications about ITR and audit form utilities. Changes may happen last minute.
• Check ICAI’s guidance notes for Section 44AB regularly.

Negotiate or Plan for Costs

• Estimate audit fees early. Plan budgets to absorb compliance costs.
• Consider pooling resources or fixed-cost services if freelancing in groups or partnerships.

Support for High-Tech Professionals Through Freelance Services

For high-tech professionals and SMEs navigating compliance while managing global work, outsourcing tasks can be a game-changer. You can get your work done with RSA Creative Studio’s Freelance service, which provides tailored solutions for professionals handling cross-border projects, client communication, and documentation. This support frees time for SMEs and freelancers to focus on growth, while ensuring smooth handling of non-core responsibilities.

Conclusion:

We see that ICAI Representation to CBDT rings a warning for freelancers and tech SMEs: deadlines are tight, audit rules stricter, and cost of non-compliance heavier. To protect operations and reputation, we advise early action, full records, and professional help.

Compliance under Section 44AB matters now more than ever. Coupled with H1-B for Freelancers and Tech SMEs concerns, clean financials and transparent audit history become assets. We must treat this representation not as just policy talk, but as a compliance priority.

Frequently Asked Questions

What is “ICAI Representation to CBDT”?

It refers to a formal request by the Institute of Chartered Accountants of India to the Central Board of Direct Taxes. It highlights issues with deadlines, process delays, and requests alignment of dates under Section 44AB.

Who must comply with Section 44AB?

People operating businesses whose turnover exceeds Rs 1 crore, or specified professionals (like doctors, lawyers, architects) whose gross receipts exceed Rs 50 lakh, need audit under Section 44AB. 

Does “H1-B for Freelancers and Tech SMEs” affect these rules?

Not directly in law. But US clients and immigration processes often want clean, audited financials. So compliance under Section 44AB boosts credibility, contracts, and may support visa or client needs.

When are the deadlines this year?

• Non-audit return filing deadline: 15 September 2025.
• Audit case ITR deadline: 31 October 2025. Section 44AB reports must comply by that date unless officially extended.

Can small professionals use presumptive schemes to avoid audits?

Yes. Professionals whose receipts fall under limits and choose presumptive schemes like Section 44ADA may avoid full audit requirements. But if they declare profits lower than the prescribed rate, audit may still be required.