Tax Audit under Section 44AB
A tax audit is a chartered accountant’s audit of your books for income tax purposes, reported in Form 3CA or 3CB with Form 3CD. For FY 2025-26 it applies once business turnover crosses ₹1 crore (₹10 crore if cash receipts and payments each stay within 5%) or professional receipts cross ₹50 lakh. CBDT has extended this year’s due date for the report to 21 October 2026.
What it is
Your statutory accounts tell shareholders how the business did. A tax audit tells the Income Tax Department. A practising chartered accountant examines your accounts and reports the particulars the department asks for, from depreciation to TDS, in a fixed format. The report goes on the Income Tax e-filing portal before your return is filed.
For FY 2025-26 (AY 2026-27), the requirement sits in Section 44AB of the Income-tax Act, 1961. The report is Form 3CA where your accounts are already audited under another law, such as the Companies Act, and Form 3CB otherwise. Both come with Form 3CD, the statement of particulars. From tax year 2026-27, the same audit moves to Section 63 of the Income-tax Act, 2025.
Who it applies to
You run a business above ₹1 crore
Total sales, turnover or gross receipts above ₹1 crore in FY 2025-26. The limit rises to ₹10 crore if cash receipts and cash payments each stay within 5% of the totals.
You earn fees above ₹50 lakh
Doctors, architects and other professionals need a tax audit once gross receipts from the profession exceed ₹50 lakh.
You declare less than the presumptive profit
Declaring profit below the presumptive rate under Section 44AD (8%, or 6% on receipts through banking channels) or Section 44ADA (50%) triggers an audit when total income exceeds the basic exemption limit. Lower income under Sections 44AE, 44BB or 44BBB needs one too.
Tax audit limits at a glance
| Your situation (FY 2025-26) | Tax audit needed when |
|---|---|
| Business, ordinary case | Turnover above ₹1 crore |
| Business with cash receipts and cash payments each within 5% | Turnover above ₹10 crore |
| Profession | Gross receipts above ₹50 lakh |
| Section 44AD business declaring below 8% (6% on banked receipts) | Total income above the basic exemption limit |
| Section 44ADA professional declaring below 50% | Total income above the basic exemption limit |
| Opted out of Section 44AD within five years of opting in (Section 44AD(4)) | Total income above the basic exemption limit, whatever the turnover |
Picture a Faridabad hardware trader with ₹4 crore of sales, almost all of it through UPI and bank transfers, who pays suppliers by RTGS. With cash receipts and cash payments each within 5%, the limit is ₹10 crore, and no tax audit is needed. Let a few large cash sales push cash receipts past 5%, and the ₹1 crore limit applies instead. The audit becomes compulsory.
Here is the catch: the 5% test applies to receipts and payments separately, and both must pass. A business that collects everything digitally but pays labour or transporters in cash can fail on the payments side alone. In practice, we run the cash percentages from your ledgers before anything else, because they decide which limit you face.
Why it matters
Get until 21 November 2026 for your ITR
Tax-audit cases file the return by the extended date of 21 November 2026, not 31 August. The audit report itself must be on the portal by 21 October 2026.
Keep your losses alive
A return filed on time lets you carry forward business losses to later years. A belated return loses that right for business and capital losses.
Fix mismatches before the department sees them
The audit reconciles your books with GST returns, TDS records and AIS before the return is filed, so mismatches are fixed on your side first.
Documents required
Pull from your books
- Finalised profit and loss account and balance sheet
- Ledgers and bank statements for the full year
- Fixed asset register with dates of purchase and sale
- Stock records with quantities, for manufacturers and traders
Collect tax and GST records
- GST returns for the year: GSTR-1 and GSTR-3B
- TDS returns and challans
- Form 26AS and the Annual Information Statement (AIS)
- Last year’s ITR and tax audit report
Prepare the auditor’s lists
- Loans taken and repaid, with the lender’s PAN
- Payments to relatives and related concerns
- A summary of cash receipts and cash payments
- MSME suppliers and the amounts due to them at year-end
How it works
Test whether the audit applies
We check turnover or receipts, the cash percentages and your presumptive-scheme history for the last five years.
Close and reconcile the books
We match your ledgers with bank statements, GST returns, TDS records and AIS, so the figures in the audit report hold together. If your books are kept month by month through online book-keeping, this step is quick.
Audit the accounts and prepare Form 3CD
Our chartered accountant examines the accounts and fills each clause of Form 3CD, with Form 3CA or 3CB as your case requires. You review the draft before it is signed.
Upload the report by 21 October 2026
We file the report on the Income Tax e-filing portal under your PAN and share the acknowledgement with you.
File your return by 21 November 2026
The return carries the audit details. Companies file ITR-6. Firms and LLPs file ITR-5, and individuals and HUFs with business income use ITR-3.
Timelines
Tax audit report: 21 October 2026
Normally due on 30 September. CBDT extended it on 28 September 2026, two days before the old deadline, for FY 2025-26 (AY 2026-27).
Income tax return: 21 November 2026
For companies and other tax-audit cases, the return date moved from 31 October to 21 November 2026 in the same extension.
Belated return: 31 December 2026
You can still file late up to 31 December 2026, but with a fee under Section 234F and without carrying forward business losses.
What happens if you miss the audit
Pay up to ₹1,50,000 under Section 271B
The lower of 0.5% of turnover or gross receipts and ₹1,50,000. On ₹2 crore of sales, 0.5% is ₹1 lakh. On ₹5 crore, the ₹1,50,000 cap applies.
Pay more for a late return
Miss 21 November 2026 and the return turns belated. That means a fee of ₹5,000 under Section 234F (₹1,000 if income is up to ₹5 lakh), interest under Section 234A, and no carry-forward of business losses.
Show reasonable cause, if you have one
The penalty is not levied if you show a reasonable cause for the failure, to the Assessing Officer’s satisfaction. Keep a record of whatever held up the audit.
Frequently asked questions
What is the tax audit limit for FY 2025-26?
₹1 crore of turnover for a business, rising to ₹10 crore if cash receipts and cash payments each stay within 5% of the totals. For professionals, the limit is ₹50 lakh of gross receipts. These figures come from Section 44AB of the Income-tax Act, 1961, for FY 2025-26 (AY 2026-27), and the same amounts continue in Section 63 of the Income-tax Act, 2025. Below them, an audit arises only in presumptive-scheme cases.
What is the due date for the tax audit report this year?
21 October 2026. The usual date is 30 September, but CBDT extended it on 28 September 2026 for FY 2025-26 (AY 2026-27). The return for tax-audit cases moved from 31 October to 21 November 2026 in the same announcement. The report has to be on the portal a month before the return, so plan for the earlier date and keep a few days in hand.
What is the difference between Form 3CA and Form 3CB?
Form 3CA is used when your accounts are already audited under another law, such as a company under the Companies Act, 2013. Form 3CB is used when they are not, as with most proprietors and partnership firms. Both are filed with Form 3CD, the statement of particulars that carries the detail. An LLP audited under the LLP Act, because turnover exceeds ₹40 lakh or contribution exceeds ₹25 lakh, uses Form 3CA.
What is the penalty for not getting a tax audit?
Under Section 271B, the lower of 0.5% of total sales, turnover or gross receipts and ₹1,50,000. It covers both failing to get the accounts audited and failing to furnish the report. On ₹1.5 crore of turnover, the penalty works out to ₹75,000; from ₹3 crore upwards it is capped at ₹1,50,000. No penalty is levied if you show the Assessing Officer a reasonable cause for the failure.
Does a company need a tax audit if its accounts are already audited?
Yes, if it crosses the Section 44AB limits. The statutory audit under the Companies Act and the tax audit are separate. The chartered accountant reports in Form 3CA, which builds on the audited accounts, along with Form 3CD. Companies file ITR-6, which for FY 2025-26 is due by 21 November 2026 after CBDT’s extension. Planned together, both audits work from the same closing figures.
Is a tax audit needed if my business made a loss?
Yes, if turnover crosses the limit. Section 44AB tests total sales, turnover or gross receipts, not profit. So a trader with ₹1.5 crore of sales and more than 5% of receipts in cash needs an audit even in a loss year. A loss also matters under the presumptive schemes: declaring income below the deemed rate triggers an audit when total income exceeds the basic exemption limit. We run both tests before you decide how to file.
Do you need a tax audit after opting out of Section 44AD?
Possibly, for five years. Under Section 44AD(4), if you opt out within five years of opting in, you cannot return to the scheme for the next five years. In that period, a tax audit is compulsory whenever your income exceeds the basic exemption limit, whatever your turnover. Say a Ballabgarh fabrication unit used 44AD for two years, then switched to regular books to show a lower profit. Even at ₹60 lakh of turnover, it needs an audit in any of those years when its income crosses that limit. We check your last five returns first.
Who can conduct a tax audit?
Only a chartered accountant in practice. The CA examines your books, signs the audit report in Form 3CA or 3CB with Form 3CD, and uploads it on the Income Tax e-filing portal under your PAN before the due date, which is 21 October 2026 this year. Our chartered accountants handle both the audit and the return that follows.
Does the new Income-tax Act change tax audit?
Not for FY 2025-26, which stays under Section 44AB of the 1961 Act. From tax year 2026-27, the audit sits in Section 63 of the Income-tax Act, 2025, with the same ₹1 crore, ₹10 crore and ₹50 lakh limits. The report is due one month before the return due date, as now. The penalty moves to Section 446 and is still the lower of 0.5% of turnover and ₹1,50,000.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Ready to begin?
Share this year’s turnover and last year’s return, and we will tell you whether Section 44AB applies and file your report before 21 October 2026.