Tax Audit

A tax audit is a mandatory examination of a taxpayer's books of account by a Chartered Accountant under Section 44AB of the Income-tax Act, 1961, to verify that income, deductions and other particulars are correctly reported. It does not levy tax itself; it produces an independent report the taxpayer furnishes to the Income Tax Department alongside the return, and it applies to eligible businesses and professionals once their receipts cross the prescribed limits.

Who it applies to

• Business: turnover above Rs 1 crore. This rises to Rs 10 crore where both cash receipts and cash payments are each 5% or less of the total (effectively 95% digital transactions).
• Profession: gross receipts above Rs 50 lakh in the financial year.
• Presumptive schemes: a taxpayer who opts out of Section 44AD/44ADA and declares profit lower than the deemed rate, while total income exceeds the basic exemption limit, also becomes liable to audit.

Forms and reporting

The auditor issues the report in Form 3CA (where accounts are already audited under another law, such as the Companies Act) or Form 3CB (in any other case), always accompanied by Form 3CD, the detailed statement of particulars. These are filed electronically on the income-tax portal.

Due date and penalty

The tax audit report is due by 30 September of the assessment year (30 September 2026 for FY 2025-26), with the linked ITR due by 31 October 2026. Failure to obtain the audit attracts a penalty under Section 271B of 0.5% of turnover or gross receipts, capped at Rs 1,50,000, though no penalty applies where there is reasonable cause.