Knowledge · Tax Audit

Tax audit: who needs one, and what changes from April 2026

A tax audit is an audit of a taxpayer's books by a Chartered Accountant, reported to the Income Tax Department in a prescribed form. This page explains who needs one and what changes as India moves to the Income-tax Act, 2025.

Who needs a tax audit

Taxpayer	Audit applies when
Business	Turnover exceeds Rs 1 crore
Business with low cash dealings	Turnover exceeds Rs 10 crore, where cash receipts and cash payments are each within 5% of the total
Profession	Gross receipts exceed Rs 50 lakh
Presumptive taxation cases	In specified situations where profit declared is lower than the deemed profit rate

What changes under the Income-tax Act, 2025

From tax year 2026-27, Section 63 of the Income-tax Act, 2025 takes the place of Section 44AB. The turnover and receipts thresholds carry over broadly unchanged.

The trigger for small businesses and professionals using presumptive taxation has been reworded. Under the new Section 63, an audit can apply where profits are claimed lower than the deemed profits, and commentators have pointed out that this no longer depends on having opted in and out of the presumptive scheme. Anyone near these limits should check their position for tax year 2026-27 early.

FY 2025-26 (AY 2026-27) continues under the 1961 Act, with Form 3CA or 3CB and Form 3CD.

Due date

The audit report is due one month before the due date of the return, which generally means 30 September following the year end. CBDT sometimes extends this date by notification.

Where reports commonly go wrong

Turnover in the books not matching GST returns, without a reconciliation on file.
Cash payments above the permitted limit, or cash receipts above the legal limit, not reported correctly.
TDS deducted late or not deducted, with the disallowance not worked out.
Loans and deposits taken or repaid in cash not captured in the relevant clauses.
Presumptive-scheme taxpayers not realising that declaring a lower profit brings them into audit.

Consequence of not getting audited

Under the 1961 Act, Section 271B provides for a penalty of 0.5% of turnover or gross receipts, up to Rs 1,50,000, where a required audit is not obtained or the report is not furnished, unless there was reasonable cause.

Frequently asked questions

Does crossing Rs 1 crore turnover always mean a tax audit?

Not always. For a business whose cash receipts and cash payments each stay within 5% of the total, the threshold is Rs 10 crore.

When is the tax audit report due?

The report is due one month before the due date of the income-tax return, which generally means 30 September for audited taxpayers. Any extension is notified by CBDT, so check the current year's position.

Which law applies to FY 2025-26?

FY 2025-26 (AY 2026-27) is audited under Section 44AB of the Income-tax Act, 1961. The Income-tax Act, 2025 applies from tax year 2026-27, where the tax audit provision is Section 63.

This page is general information on the law as it stood when written, not professional advice for any specific case. Rules, forms and due dates change; check the current position before acting.