Income Tax

Tax Audit Reporting Under New Income-tax Act 2025: Step-by-Step Compliance Playbook

By CA Nikhil GuptaUpdated June 2026New Act

Reviewed by CA Nikhil Gupta · Last reviewed 26 September 2026

Corrected 26 September 2026: the earlier version cited Section 194 and Forms 6CA/6CD, which are not the provisions or forms for tax audit. Section 63, Form 26 and Rule 47 are the correct references, and the due dates and the case study were rewritten.

Official sources cited: Income-tax Act 2025, Sections 58, 62, 63 and 263 | Income-tax Rules 2026 (Rule 47, Form 26) | ICAI guidance | incometax.gov.in

Tax audit, required by Section 44AB of the 1961 Act, is now Section 63 of the Income-tax Act 2025. The core requirement is the same: businesses and professionals above set limits must have their accounts audited by an accountant and file the report. The audit report and statement of particulars — Forms 3CA, 3CB and 3CD — are replaced by Form 26 (Rule 47). For FY 2025-26 (AY 2026-27) the 1961 Act and the old forms still apply. This guide sets out who must get audited, which form and dates apply, and what to prepare.

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Tax Audit Applicability — Who Must Get Audited

Category	Old Section	New Section	Audit required if
Business — general	44AB	63	Total sales, turnover or gross receipts exceed ₹1 crore in the year
Business — mostly digital	44AB (proviso)	63	The limit is ₹10 crore if cash receipts do not exceed 5% of total receipts and cash payments do not exceed 5% of total payments
Profession	44AB	63	Gross receipts exceed ₹50 lakh in the year
Presumptive taxation	44AB read with 44AD / 44ADA	63 read with 58(2) and 61(2)	Profit is claimed to be lower than the deemed (presumptive) profit

Section 63 also treats the audit as done if the accounts are already audited under another law and the report is furnished by the due date. Books of account themselves are covered separately, in Section 62 (old Section 44AA).

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Presumptive limits: the presumptive scheme for businesses (old Section 44AD, now Section 58) is available up to ₹2 crore of turnover, or ₹3 crore where cash receipts do not exceed 5%; for professionals (old Section 44ADA) the limits are ₹50 lakh and ₹75 lakh. A business above those limits cannot use the presumptive route and is tested only against the ₹1 crore / ₹10 crore audit limits.

The Audit Report Form — Form 26 Replaces 3CA, 3CB and 3CD

Under the Income-tax Rules 2026, Rule 47 prescribes Form 26 for the report of audit under Section 63:

Part A — for a person who carries on business or profession and is required by or under another law to get accounts audited (the old Form 3CA case).
Part B — for any other person carrying on business or profession (the old Form 3CB case).
The statement of particulars that was Form 3CD is part of the same form, with the clause-wise observations and qualifications.

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Old forms for AY 2026-27: for FY 2025-26 income (AY 2026-27) the tax audit is done under Section 44AB of the 1961 Act, using Forms 3CA/3CB and 3CD. Form 26 and Section 63 apply from Tax Year 2026-27, that is, income earned from 1 April 2026.

What Auditors Check — Carried Over From Form 3CD Practice

The Form 26 clause numbers should be read from the form itself; the substantive checks below carry over from Form 3CD, with the section references now under the new Act.

Area	Old provision	New Act reference	What is reported
TDS not deducted or not paid	Section 40(a)(ia)	Section 35(b)	Amounts on which TDS was missed or deposited late, with the 30% disallowance where applicable
Payments allowed only when made	Section 43B (including the MSME 45-day rule)	Section 37	Statutory dues and payments to micro and small enterprises not paid in time
Cash payments and related parties	Section 40A(3) and 40A(2)	Section 36	Cash payments above the limit; payments to related persons
Expenditure by GST status	Form 3CD clause 44	Form 26 (check the clause)	Break-up of expenditure on registered dealers, composition dealers, unregistered persons and exempt supplies
Digital ratio	Section 44AB proviso	Section 63	Cash receipts and cash payments as a share of totals, which decide the ₹1 crore or ₹10 crore limit

Illustration: Does an ₹8 Crore Trader Need an Audit?

Hypothetical — Tax Year 2026-27, a business that does not use the presumptive scheme

A trading business has ₹8 crore of turnover. Whether it needs a tax audit depends on the cash ratios, not the turnover alone:

Cash receipts 3%, cash payments 4%

Limit ₹10 crore — no audit

Cash receipts 3%, cash payments 8%

Limit ₹1 crore — audit required

In the second case the payment ratio is above 5%, so the higher limit is not available and ₹8 crore is well over the ₹1 crore limit. The auditor checks the ratios from the cash book and bank statements before deciding.

Lesson: compute the cash-receipt and cash-payment ratios early in the year, because a single heavy cash payment can change the audit requirement.

Due Dates and Consequences

Parameter	Details
When the audit report is due	One month before the due date for the return under Section 263(1) (Section 63). For an audit case with a return due date of 31 October, that is 30 September.
FY 2025-26 (AY 2026-27)	Audit report by 30 September 2026; return by 31 October 2026 (audit cases)
Tax Year 2026-27	The report is due one month before the Section 263(1) due date for that year; check the due date in force when the year ends
Extension	Only by CBDT notification; do not assume one
Penalty for failing to get accounts audited	Under the 1961 Act, Section 271B: 0.5% of turnover or gross receipts, capped at ₹1,50,000, unless reasonable cause is shown. Confirm the corresponding penalty provision of the new Act before citing it; the late-filing fee in Section 428 relates to the return, not to the audit report
Reasonable-cause protection	Old Section 273B; Section 470 of the new Act
Filing	The chartered accountant uploads the report on the income-tax e-filing portal and it carries a UDIN

Tax Audit Readiness Checklist (CA + Client)

Finalise books of account early — trial balance, bank reconciliations and the depreciation schedule
Reconcile GSTR-3B, GSTR-1 and the books, and list the timing differences
List micro and small enterprise vendors and check payments against the 45-day rule
Check TDS deduction and deposit on every payment above the threshold against the TDS statements
Compute the cash-receipt and cash-payment ratios to confirm the ₹1 crore or ₹10 crore limit
List related-party transactions and cash payments above the limit
Confirm the auditor's registration and obtain a UDIN for the report
Furnish the audit report by the due date — one month before the return due date

Frequently Asked Questions

Under Section 63 of the Income-tax Act 2025, a business must get its accounts audited if total sales, turnover or gross receipts exceed ₹1 crore in the year. The limit is ₹10 crore if cash receipts do not exceed 5% of total receipts and cash payments do not exceed 5% of total payments. For a profession the limit is ₹50 lakh of gross receipts. A person who claims profits lower than the deemed profits under the presumptive provisions (Sections 58(2) and 61(2)) also needs an audit.

Form 26, prescribed by Rule 47 of the Income-tax Rules 2026, replaces Forms 3CA, 3CB and 3CD. Part A is used where accounts are audited under another law and Part B in other cases. For AY 2026-27 (FY 2025-26 income) the tax audit still follows Section 44AB of the 1961 Act with Forms 3CA/3CB and 3CD.

Section 63 requires the report to be furnished one month before the due date for the return under Section 263(1). For FY 2025-26 an audit case has a return due date of 31 October 2026, so the report is due by 30 September 2026. For Tax Year 2026-27 the report falls due one month before that year's return due date.

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Primary category: Income Tax
Official starting point: www.incometaxindia.gov.in

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