A tax audit is an audit of the accounts of a business or profession, done by an accountant, whose report goes to the department with the return. Under the Income-tax Act, 1961 the rule was section 44AB and the report was in Form 3CA or 3CB with a statement of particulars in Form 3CD. Under the Income-tax Act, 2025 the rule is section 63, and the report is Form No. 26.
Which form for which year
- FY 2025-26 (assessment year 2026-27) and earlier. Forms 3CA/3CB and 3CD under the 1961 Act, even if the report is filed after 1 April 2026.
- Tax year 2026-27 onwards. Form No. 26 under section 63 and Rule 47 of the Income-tax Rules, 2026.
Who needs a tax audit under section 63
According to the department’s guidance on Form 26, the following must get accounts audited:
- A person carrying on business whose total sales, turnover, or gross receipts exceed Rs 1 crore. The limit is Rs 10 crore where cash receipts and cash payments each do not exceed 5 per cent of total receipts and total payments.
- A person carrying on a profession whose gross receipts exceed Rs 50 lakh.
- Certain presumptive-taxation cases, where income declared is lower than the deemed income, or where a person leaves a presumptive scheme within its lock-in period and income exceeds the basic exemption limit.
Whether a particular person is covered turns on the facts and on the text of section 63. The summary above is not a substitute for reading it.
The due date
The report is due one month before the due date for the return of income under section 263(1). Where the return is due on 31 October, Form 26 is due by 30 September. Where the return is due on 30 November, Form 26 is due by 31 October. The same logic applied to Form 3CD for assessment year 2026-27.
Update, 3 October 2026. For assessment year 2026-27 (income of FY 2025-26), CBDT Circular No. 07/2026 of 28 September 2026 extended the specified date for the audit report to 21 October 2026, and the return due date to 21 November 2026, for the category of persons the Circular names. See the regulatory updates.
How Form 26 is organised
- Part A holds the particulars of the assessee.
- Part B is the statement of particulars. Each clause needs a Yes or No answer, and a schedule is filled only where the answer calls for it.
- Part C is the audit report where the accounts are audited under another law, such as the Companies Act, 2013. It corresponds to the old Form 3CA.
- Part D is the report where accounts are not audited under another law. It corresponds to the old Form 3CB.
The form is signed by an accountant as defined in the Act, with a UDIN, and with the firm registration number where the audit is in a firm’s name. The assessee then accepts it electronically on the portal.
What is different in reporting
- Any observation or qualification must be placed in one of three categories: test-check basis, based on management representation, or unable to verify.
- The auditor states the impact, if any, of statutory-audit qualifications on profit or loss.
- TDS and TCS reporting gives the number and amount of transactions not reported in the statements as last corrected.
- Where books are kept electronically, the form asks for the location of the server and the India-located backup.
Penalty for missing the audit
Section 446 allows the Assessing Officer to impose a penalty on a person who fails to get accounts audited or to furnish the report. The penalty is the lesser of 0.5 per cent of turnover or gross receipts, and Rs 1,50,000.
Records to keep ready
- Closed books with the trial balance and ledgers; the financial statements, if any other law requires them to be audited.
- Total of sales, turnover, or gross receipts, and the cash receipts and payments for the year, to test the Rs 10 crore condition.
- TDS and TCS returns as last filed, with correction statements.
- Loan, deposit, and large-payment details, including those made by journal entry or in non-cash modes.
- Name and location of the accounting software, and of the backup server.