Tax audit for a travel agency: is turnover the fare or your fee?

Your agency processes maybe ₹2.5 crore of air tickets a year through the bank account, but the fees and commission you actually keep add up to ₹18-20 lakh. When your CA asks for "turnover" for the tax audit, which number do you hand over? Ask two accountants and you can get two different answers, because the Income-tax Act never uses the phrase "travel agent" near the audit section.

The FY 2025-26 tax audit report deadline moved from 30 September to 21 October 2026 under CBDT Circular No. 07/2026, which also moved the return for audit cases to 21 November 2026 (as of October 2026; check the portal in case either date moves again). This post gives you a stream-by-stream turnover rule, three worked agencies, and a one-page worksheet for the CA meeting.

Which law applies to which year

Two laws, same arithmetic, different forms. FY 2025-26, the year you're closing now, is audited entirely under the old Income-tax Act, 1961. From tax year 2026-27 (starting 1 April 2026), the Income-tax Act, 2025 takes over, and the cost of a missed audit changes from a percentage penalty to a flat fee.

The new Act came into force on 1 April 2026 and repeals the 1961 Act, but section 536 keeps the old Act applying to proceedings, penalties included, for any tax year that began before that date. FY 2025-26 began 1 April 2025, so it finishes under the 1961 Act regardless of when you file.

What	FY 2025-26 (now)	Tax year 2026-27 onward
Governing section	Section 44AB, 1961 Act	Section 63, 2025 Act
Audit report form	Form 3CA/3CB-3CD	Form No. 26 (Rule 47)
Report due date	21 October 2026 (extended)	30 September 2027, unless extended
Missed-audit cost	Lesser of 0.5% of turnover or ₹1,50,000 (section 271B)	₹75,000 up to one month late, ₹1,50,000 after (section 428(c))

Both laws run the same ₹1 crore / ₹10 crore tests, so everything below applies either year. For every other renumbered section, see our old-to-new section map for travel agents.

The two limits: ₹1 crore and ₹10 crore

A travel agency must get its accounts audited once turnover crosses ₹1 crore in the year. That climbs to ₹10 crore only if two conditions both hold: cash receipts are 5% or less of all amounts received, and cash payments are 5% or less of all payments made (section 44AB for FY 2025-26; the identical test sits in section 63 from tax year 2026-27). Miss either condition and you're back on ₹1 crore, not a blended average. Both tests treat a cheque or draft that isn't account payee as cash, so a bearer cheque from a yatra group counts against you.

Travel agency is a business, not a profession, so the lower ₹50 lakh profession limit never applies; ICAI's Guidance Note (para 4.5(vii)) lists "travel agent" among activities treated as business. ₹40 lakh or ₹60 lakh, still quoted on old forum threads, are limits from before AY 2013-14: the business limit has been ₹1 crore since then.

Fare or fee: what counts, stream by stream

The working rule comes from ICAI's Guidance Note on tax audit (professional guidance, not the Act itself): money you receive purely to pass on to an airline, railway and the like, as reimbursement of a client's expense, is not your turnover. Money you charge for a package, quoted as one consolidated price for transport, stay and other arrangements, is turnover in full, even though most of it ends up with suppliers (ICAI Guidance Note, paras 5.14(viii) and 5.15).

The note's advertising-agent line is the closest analogy for block buying: an agent who books space in bulk and recovers different amounts from different clients must include what it recovers (para 5.14(ix)). Read "seats" for "space". A commission agent's sale is excluded only where ownership, or all significant risks and rewards, stay with the principal until the sale (para 5.9). The worksheet at the end applies all this stream by stream.

The net-fare portal ticket: argue both sides

Here's the case that actually splits CAs: you buy a ticket off a B2B portal wallet at net fare and resell it at your own price, no separate fee line on the invoice. Is the full resale price your turnover, or just the markup?

CBDT's own test, in a 1986 circular reproduced in the Guidance Note, is that it turns on the express terms of each contract: "no hard and fast rule can be laid down" (CBDT Circular No. 452, 1986, via ICAI's Guidance Note). It splits a kachha arhatia, who acts only as agent, has no personal interest of his own in the deal, and is indemnified by the principal for any loss, from a pacca arhatia, who acts as principal, shares in the profit and loss, and is liable to both sides of the deal.

Argue the agent side: the ticket is issued in the passenger's name, under the airline's fare rules, and if the airline cancels, the client's claim runs against the airline, not you. Argue the principal side: you paid the portal from your own wallet, set your own price, and still owe the portal whether or not the client pays you. We found no tribunal or court ruling on this exact scenario, so treat it as a CA call for your agency specifically, and make the invoice say what you actually are: fare and fee as two lines if you're claiming agent treatment, or no fee line at all if you're pricing like a principal.

Your books, not your bank statement, set the number

Turnover for audit purposes is "according to the accounts maintained by the assessee," tested fresh every year, not a figure off a bank statement (ICAI Guidance Note, para 5.19). If reimbursements such as client money for tickets and visas are credited to a separate account in your books, only the net surplus on that account is added to turnover, not the pass-through flow (para 5.13(v)).

An assessing officer doesn't always see it that way first. In a Mumbai ITAT order of 10 June 2025 (a travel agent, AY 2013-14), the AO took total bank deposits of ₹3,17,15,469 as turnover above ₹1 crore and levied the maximum ₹1,50,000 penalty for no audit. The agent argued his real gross receipts, commission and service charges, were far below the limit, and the CIT(A) deleted the penalty; the Tribunal dismissed the department's appeal on it only for low tax effect, so there's no Tribunal ruling on the merits (Mumbai ITAT order, 10 June 2025, ITA 893-894/Mum/2025).

On income, though, the books were unaudited and some receipts unsupported, so the CIT(A) estimated profit at 8% of total bank credits (an extra ₹16,76,193, in place of the AO's ₹2,28,78,439 addition), and the Tribunal upheld that on the merits. The lesson: an AO who starts from gross credits may ask you to prove what was pass-through money, so build the evidence trail a clean defence against unexplained-credit scrutiny needs before the question is asked.

Three agency shapes, worked

All three are hypothetical proprietorships. Amounts exclude GST credited to a separate GST account, and client ticket and visa money runs through a clearing account unless stated otherwise.

Example A, ticketing desk: 2,400 tickets through B2B portals; client collections ₹2,40,00,000 including ₹600-per-ticket fees shown separately (₹14,40,000); portal commission/incentives ₹3,60,000; visa work ₹32,00,000 collected (₹30,00,000 passed to embassies/VFS, ₹2,00,000 own fee). Booked as agent, turnover is ₹14,40,000 + ₹3,60,000 + ₹2,00,000 = ₹20,00,000, nowhere near ₹1 crore, whatever the cash mix. Now buy the same tickets at net fare, resell them in your own name with no fee line, and book gross sales: turnover jumps to ₹2,42,00,000 or more (₹2,40,00,000 of ticket sales plus the ₹2,00,000 visa fee), and the cash test decides whether audit applies. Cash receipts of ₹9,00,000 pass on either reading (under ₹12,10,000, 5% of turnover, and ₹13,78,000, 5% of all ₹2,75,60,000 received), so with cash payments also within 5% there's no audit; ₹16,00,000 fails both. Either way the desk is above ₹1 crore and becomes a TDS deductor next year.

Example B, package operator: ₹1,65,00,000 of packages at consolidated prices, no ticketing or commission income, ₹11,00,000 collected in cash from yatra groups and the other ₹1,54,00,000 by bank or UPI. Turnover is the full ₹1,65,00,000. Cash of ₹11,00,000 exceeds 5% of that (₹8,25,000), so the ₹10 crore band is lost and audit applies on the ₹1 crore limit. Two routes out: bring cash receipts under ₹8,25,000 (with cash payments under 5% too), or declare presumptive income of at least ₹10,12,000 under 44AD (FY 2025-26) or section 58 (from tax year 2026-27): 8% of the ₹11,00,000 cash plus 6% of the ₹1,54,00,000 banked, ₹88,000 + ₹9,24,000. A pure package seller with no commission or agency income should qualify.

Example C, mixed agency: This year, packages of ₹60,00,000 plus ticket fees of ₹9,00,000 (off ₹1,20,00,000 collected) give turnover of ₹69,00,000, well under ₹1 crore. Next year packages grow to ₹1,10,00,000, tickets unchanged: turnover is now ₹1,19,00,000. Cash receipts of ₹14,00,000 exceed 5% of both ₹1,19,00,000 (₹5,95,000) and the ₹2,30,00,000 of all amounts received (₹11,50,000), so audit is required; presumptive cover is doubtful since the agency also earns ticketing fees as an agent. Bring cash receipts down to ₹5,00,000, keep cash payments within 5%, and the ₹10 crore band applies instead, though the agency is still a TDS deductor and still on regular books, since turnover tops ₹1 crore either way.

The cash test, done properly

Both conditions must pass, on their own denominators. Cash receipts must be 5% or less of all amounts received, which on a plain reading includes every rupee in, client money collected for airlines and embassies too. We found no ruling that settles that reading, so for safety keep cash receipts within 5% of your turnover alone as well; then you pass on either reading. Cash payments must separately stay at 5% or less of all payments made.

Cash usually sneaks past 5% through yatra and pilgrimage groups paying currency notes, walk-in ticket counters, and drivers, guides and small hotels who still expect cash on the ground. Cutting receipt-side cash also keeps you clear of the ₹2 lakh cash-receipt rule that applies regardless of audit status, and paying suppliers digitally keeps you clear of the ₹10,000-a-day cash-payment rule.

What crossing ₹1 crore changes, even with no audit

For a proprietor (individual or HUF), crossing ₹1 crore of turnover has consequences that don't wait for an audit requirement; firms and companies deduct TDS regardless of turnover. From the next tax year, the proprietor must deduct TDS as a payer: 2% on the whole commission or brokerage once a payee's total crosses ₹20,000 in the year, and 1-2% on contractor-type payments like coach hire above ₹30,000 per bill or ₹1,00,000 in the year (sections 402 and 393, Income-tax Act 2025; the trigger is the preceding year's turnover, not whether you were actually audited). Books of account become compulsory for a proprietor once turnover crosses ₹25 lakh or business income crosses ₹2,50,000 in any one of the three preceding years (section 62; ₹10 lakh and ₹1,20,000 for a firm), a lower bar than the audit limit. From tax year 2026-27 the return due date shifts too: 31 October for audit cases against 31 August for non-audit business income (section 263(1)(c)).

For a smaller agency, missing the audit can cost more under the new regime than the old one. Take turnover of ₹1,19,00,000 that should have been audited: under FY 2025-26's section 271B, the penalty is 0.5% of turnover, ₹59,500, well under the ₹1,50,000 cap. Under tax year 2026-27's section 428(c), the fee is a flat ₹75,000 if up to a month late, ₹1,50,000 after, regardless of how close to ₹1 crore turnover actually was. We couldn't confirm that a reasonable-cause defence applies to the new fee, so don't assume it does.

44AD or section 58: when presumptive tax keeps you out of audit

Presumptive filers sit outside the audit section by design: section 63(2), and the equivalent first proviso under 44AB, exempts anyone who declares income at or above the deemed presumptive rate. But the scheme excludes anyone who earns commission or brokerage, or carries on an agency business at all (section 58; the same exclusion runs under 44AD of the 1961 Act).

That reads cleanly for a pure package operator with no ticketing or commission income, who can use presumptive income on turnover up to ₹2 crore (₹3 crore if cash receipts are 5% or less of turnover) at 6% of digital receipts and 8% of the rest. For a mixed agency that also earns ticket commission, whether it can run a separate package stream through presumptive income is contested: the Guidance Note excludes a presumptive business's turnover from the audit count, but the Act's eligibility test reads at the level of the person, not the stream. Get your CA's view in writing before filing on that basis. A full walk-through of ITR choices and the presumptive trap sits in our 44AD guide for travel agents.

The one-page turnover worksheet

Fill this in before your CA meeting. It won't settle the contested cases by itself, but it puts every number on one page.

Step 1: add up each stream

Stream	How you sold it	Counts toward turnover	Your figure (₹)
Air/rail tickets, fee shown separately	Agent	Fee + commission only
Net-fare tickets resold in your name, no fee line	Contested	Ask CA: fee-only or full value
Packages at one consolidated price	Principal	Full price (GST separate)
Hotels/transfers at actual cost + fee	Agent	Fee only
Block/group seats or rooms resold at your price	Likely principal	Full amount recovered
Visa, embassy, VFS/BLS fees at actual	Reimbursement	Nil (service fee counts)
Insurance, forex and other commissions	Agent	Commission only
Other business of the same proprietor	-	Add in (clubbed)
Total turnover

Step 2: run the cash test on both sides

Line	What to total	Amount (₹)
A	All amounts received this year, including client money collected for airlines/embassies
B	Of which received in cash (including non-account-payee cheques/drafts)
C	All payments made this year
D	Of which paid in cash

B/A and D/C must both come to 5% or less. If both pass, the ₹10 crore limit applies. If either fails, you're on the ₹1 crore limit. Because the reading of line A isn't settled, also check B against your Step 1 total: under 5% there too, and you pass on either reading.

Step 3: decide

Question	Your answer	What it governs
Turnover above your limit (₹1 crore, or the ₹10 crore band)?	Yes/No	Audit required if yes
Presumptive declared under section 58/44AD (only if no commission/agency income)?	Yes/No	Exempts you from audit if at or above the deemed rate
Proprietor's turnover crossed ₹1 crore this year?	Yes/No	TDS deductor from next tax year
Proprietor's turnover above ₹25 lakh, or income above ₹2,50,000, in any of the last three years?	Yes/No	Books of account compulsory

Before you sign off, check:

• A separate clearing account exists for client ticket and visa money, with your fee booked as income off it, not the gross flow.
• Invoices show the fare or embassy fee as a line separate from your own fee.
• Portal wallet statements reconcile to the fee and commission actually booked.
• GST and TCS sit in their own ledger accounts, not mixed into sales.
• FY 2025-26's report: Form 3CB-3CD, due 21 October 2026 after the extension. Tax year 2026-27's: Form No. 26, due 30 September 2027 unless extended.

Common questions

Travel agent ka turnover ticket value hoga ya commission?

Depends on how you sold it. Booked as an agent, with your fee shown separately, only the fee and commission count. Sold as a package at one consolidated price, the full price counts. Resold in your own name with no fee line, the full ticket value may count, and that case is genuinely contested, so confirm with your CA using your actual contract and invoices, not a forum answer.

What is the tax audit limit for a travel agency in 2026?

₹1 crore of business turnover, rising to ₹10 crore only if cash receipts and cash payments are each 5% or less of their totals (section 44AB for FY 2025-26, section 63 from tax year 2026-27), as of October 2026. Rules change; confirm with your CA for later years.

Is GST turnover the same as tax-audit turnover?

No. ICAI's Guidance Note says the turnover reported in GST returns may differ from turnover computed for tax audit, and that GST credited to its own ledger account isn't audit turnover (ICAI Guidance Note, paras 5.5-5.6). Don't reuse your GST annual-return figure as audit turnover without checking both separately.

What happens if I missed the tax audit?

For FY 2025-26, the penalty under section 271B is the lesser of 0.5% of turnover or ₹1,50,000, and it isn't imposed if you prove reasonable cause (section 273B). ICAI's Guidance Note lists a bona fide interpretation of "turnover" based on expert advice among the causes tribunals have accepted (para 8.3), one more reason to get your CA's view in writing. For tax year 2026-27 onward, section 428(c) replaces that with a flat fee: ₹75,000 if up to a month late, ₹1,50,000 after. We couldn't confirm whether reasonable cause applies to that fee; don't bank on it.

The short version

• Fee or commission on bookings you make as an agent counts toward tax-audit turnover; the full price of packages and anything you sell as principal counts in full, per ICAI's Guidance Note.
• The limit is ₹1 crore, rising to ₹10 crore only if cash receipts and cash payments are each 5% or less of their own totals; non-account-payee cheques count as cash.
• FY 2025-26 runs under section 44AB on Forms 3CA/3CB-3CD, report due 21 October 2026 (extended); tax year 2026-27 onward runs under section 63 on Form No. 26.
• A net-fare ticket resold in your own name with no fee line is a genuinely contested case; we found no ruling that settles it, so get your CA's view and make your invoicing match whichever side you're claiming.
• For a proprietor, turnover above ₹1 crore means deducting TDS from the next tax year, and compulsory books apply well below that, whether or not you're actually audited.
• Missing the audit costs a percentage penalty (capped at ₹1,50,000) for FY 2025-26, but a flat ₹75,000 to ₹1,50,000 fee from tax year 2026-27, so don't assume the old cushion still applies.