tax audit limit Archives - Tax Heal https://www.taxheal.com/tag/tax-audit-limit Complete Guide for Income Tax and GST in India Mon, 11 May 2026 06:10:09 +0000 en-US hourly 1 https://wordpress.org/?v=7.1.2 TAX AUDIT LIMITS AY 2026-27 with EXAMPLEs https://www.taxheal.com/tax-audit-limits-ay-2026-27-with-examples.html Sun, 10 May 2026 08:02:52 +0000 https://www.taxheal.com/?p=129212 TAX AUDIT LIMITS AY 2026-27 with EXAMPLE I TAX AUDIT LIMITS AY 2026-27 with EXAMPLEs How Tax audit will be done for AY 2026-27 as the New income Tax Act 2025 is effective from 01st april 2026 The tax audit report for FY 2025-26 will be filed after 1st April, 2026. Which Act will govern… Read More »

]]> TAX AUDIT LIMITS AY 2026-27 with EXAMPLE I

TAX AUDIT LIMITS AY 2026-27 with EXAMPLEs

How Tax audit will be done for AY 2026-27 as the New income Tax Act 2025 is effective from 01st april 2026

The tax audit report for FY 2025-26 will be filed after 1st April, 2026. Which Act will govern the filing of the tax audit report for FY 2025-26 (AY2026-27)?
Ans. The audit report for FY 2025-26 relates to AY 2026-27 under the Income-tax Act, 1961. It must be filed in the prescribed form under the old Act (Form 3CA/3CB/3CD as applicable), even if the actual filing occurs after 01.04.2026. The due date for furnishing the tax audit report for AY 2026-27 is one month before the ITR due date, e.g., 30th September, 2026 for cases where the ITR due date is 31st October, 2026, and 31st October, 2026 for transfer pricing cases where the ITR due date is 30th November, 2026.

Which form should be used for the tax audit for FY 2025-26 (AY 2026-27)?
Ans. For FY 2025-26 (AY 2026-27), the tax audit report must be filed using the existing forms prescribed under the Income-tax Act, 1961 — Form 3CA (for persons audited under another law), Form 3CB (for all others), and Form 3CD (statement of particulars under section 44AB of the 1961 Act). The due date for filing the tax audit report for AY 2026-27 is 30th September, 2026.

Video Explanation of Tax Audit limit 2026-27

TAX AUDIT LIMITS AY 2026-27

For Assessment Year (AY) 2026-27 (relating to Financial Year 2025-26), the turnover and gross receipt limits for mandatory tax audits under Section 44AB of the Income Tax Act remain as follows:

1. For Businesses

  • Basic Limit: A tax audit is mandatory if the total sales, turnover, or gross receipts exceed ₹1 Crore.
  • Enhanced Digital Limit: The total sales, turnover, or gross receipts exceed ₹10 Crore if:
    • Cash receipts do not exceed 5% of total receipts.
    • Cash payments do not exceed 5% of total payments.
  • Presumptive Taxation (Sec 44AD): If an eligible business opts for the presumptive scheme, the turnover limit for audit is ₹2 Crore. However, this limit increases to ₹3 Crore if cash receipts are ≤ 5% of total turnover. An audit is only required if the taxpayer declares profits lower than the prescribed rates (6% or 8%) and their total income exceeds the basic exemption limit.

2. For Professions

  • Basic Limit: A tax audit is mandatory if gross receipts from the profession exceed ₹50 Lakh.
  • Enhanced Digital Limit (Sec 44ADA): For specified professionals (like doctors, lawyers, CAs), the gross receipt limit for opting into presumptive taxation is ₹75 Lakh, provided cash receipts do not exceed 5% of total receipts.
  • Audit Trigger: If a professional declares profits lower than 50% of gross receipts and their total income exceeds the basic exemption limit, a tax audit becomes mandatory.

Key Deadlines & Compliance

  • Tax Audit Report Due Date: The audit report must be filed by 30th September 2026.
  • ITR Filing Due Date: For taxpayers subject to tax audit, the return filing deadline is 31st October 2026.
  • Penalty for Non-Compliance: Failure to get accounts audited can attract a penalty under Section 271B of 0.5% of turnover/gross receipts or ₹1,50,000, whichever is lower.
  • Audit Ceiling: From April 1, 2026, a Chartered Accountant can conduct a maximum of 60 tax audits per financial year.

Tax Audit Due to opting out of Section 44AD and 44ADA

Yes, an assessee can opt out of a tax audit in future years, but the rules differ significantly between businesses and professions due to specific “lock-in” provisions.

1. For Businesses (Section 44AD)

If you are currently under audit because your turnover exceeded the threshold (e.g., ₹1 Crore or ₹10 Crore), you can opt out of the audit in a future year by meeting the criteria for Presumptive Taxation.
  • The 5-Year Lock-in Rule: If you opt for the presumptive scheme (declaring 6%/8% profit), you must continue it for 5 consecutive years.
  • Consequence of Opting Out Early: If you opt out of the presumptive scheme before the 5-year period ends (by declaring a profit lower than 6%/8%), you are barred from re-entering the presumptive scheme for the next 5 assessment years.
  • Mandatory Audit During Barred Period: During those 5 “barred” years, a tax audit becomes mandatory for every year your total income exceeds the basic exemption limit, regardless of how low your turnover is. 

2. For Professionals (Section 44ADA)

Professionals have more flexibility compared to businesses.
  • No 5-Year Restriction: Unlike Section 44AD for businesses, Section 44ADA for professionals does not have a mandatory 5-year lock-in period.
  • Switching Back and Forth: A professional can opt for presumptive taxation in one year (no audit) and switch to a regular audit (declaring lower profits) in the next year, then switch back to the presumptive scheme again the following year without being barred. [5, 10, 13, 14, 15]

3. Automatic Opt-Out via Digital Transactions

You can also “opt out” of a mandatory audit if you shift your business model to be primarily digital:
  • If your cash receipts and payments are 5% or less of your total transactions, your audit limit increases from ₹1 Crore to ₹10 Crore.
  • If your turnover stays below this ₹10 Crore limit in future years and you maintain the <5% cash ratio, you will no longer require a tax audit.

Summary Comparison

Feature Business (Sec 44AD) Profession (Sec 44ADA)
Lock-in Period 5 Consecutive Years None
Re-entry Bar 5-Year Ban if opted out early No Ban
Audit Trigger Profits < 6%/8% OR Turnover > ₹10 Cr* Profits < 50% OR Receipts > ₹75 L*
*Assuming digital transaction criteria (cash ≤ 5%) are met.
TAX AUDIT LIMITS AY 2026-27 with EXAMPLEs

TAX AUDIT LIMITS AY 2026-27 EXAMPLE

For Assessment Year (AY) 2026-27, whether a tax audit is mandatory depends on the turnover, the mode of transaction (cash vs. digital), and whether the taxpayer opts for presumptive taxation.

1. Example for Business (Retail Trader)

Assume a retail trader, Mr. A, has different scenarios for his turnover in Financial Year 2025-26:
  • Scenario A (Audit Mandatory): His turnover is ₹1.5 Crores, and he does not opt for the presumptive taxation scheme (Sec 44AD). Since his turnover exceeds the ₹1 Crore basic limit, a tax audit is mandatory.
  • Scenario B (Audit Not Mandatory – Digital): His turnover is ₹8 Crores, but 98% of his receipts and payments are digital (NEFT/UPI/Cheque). Since cash transactions are below 5%, the audit limit is enhanced to ₹10 Crores, so no audit is required.
  • Scenario C (Presumptive Scheme): His turnover is ₹2.5 Crores, and 96% of his receipts are digital. He opts for Section 44AD and declares 6% profit. No audit is required because his turnover is within the enhanced ₹3 Crore limit for digital presumptive businesses.

2. Example for Profession (Interior Decorator)

Assume an interior decorator, Ms. B, has the following scenarios:
  • Scenario A (Audit Mandatory): Her gross receipts are ₹60 Lakhs. As a professional, if she does not opt for presumptive taxation, she must get an audit because her receipts exceed the ₹50 Lakh basic limit.
  • Scenario B (Audit Not Mandatory – Presumptive): Her gross receipts are ₹70 Lakhs, and all payments are via bank transfer. She opts for Section 44ADA and declares 50% of her receipts as profit. No audit is required because she is within the enhanced ₹75 Lakh limit for digital professional receipts.
  • Scenario C (Audit Triggered by Low Profit): Her gross receipts are ₹40 Lakhs (below the audit limit). However, she wants to declare only 20% profit (less than the 50% required by Sec 44ADA). Since her total income exceeds the basic exemption limit, she must undergo a tax audit to justify the lower profit.

Summary of Thresholds for AY 2026-27

Category Basic Audit Limit Enhanced Digital Limit Presumptive Scheme Limit
Business ₹1 Crore ₹10 Crore (if cash Receipts and Payments ≤ 5%) ₹2 Crore (up to ₹3 Cr if digital)
Profession ₹50 Lakh ₹75 Lakh (if cash Receipts ≤ 5%) ₹50 Lakh (up to ₹75 Lakh if digital)
Meaning of Turnover for Tax Audit
The term “turnover” for the purpose of a tax audit under Section 44AB generally refers to the aggregate amount for which sales are effected or services are rendered by an enterprise. Since the Income Tax Act does not strictly define the term, it is interpreted using the Guidance Note on Tax Audit provided by the Institute of Chartered Accountants of India (ICAI).

What is Included in Turnover?

  • Gross Sales/Receipts: The total value of all goods sold or services provided during the year.
  • Sales of Scrap: Proceeds from the sale of manufacturing scrap, even if shown as “Miscellaneous Income” in the books.
  • Taxes (Inclusive Method): If you follow an “inclusive” method of accounting where sales prices include taxes like GST, those taxes are included in the turnover for the purpose of the audit limit. As per ICAI Guidance Note “The term ‘turnover’ for the purposes of this clause may be interpreted to mean the aggregate amount for which sales are effected or services rendered by an enterprise. If GST or any other tax is included in the sale price, no adjustment in respect thereof should be made for considering the quantum of turnover. Trade discounts can be deducted from sales but not the commission allowed to third parties. If, however, GST or any other indirect  tax recovered are credited separately to GST or other tax account (being separate accounts) and payments to the authority are debited in the same account, they would not be included in the turnover. However, sales of scrap shown separately under the heading ‘miscellaneous income’ will have to be included in turnover.”
  • Stock-in-Trade Sales: Proceeds from selling shares, securities, or property if they are held as stock for business (not as personal investments).

What is Excluded from Turnover?

  • Trade Discounts: Discounts allowed on the sales invoice itself are deducted from the total sales.
  • Sales Returns: The value of goods returned by customers, even if they relate to sales from a previous year.
  • Sale of Fixed Assets: Money received from selling business assets (like machinery or furniture) is not part of turnover; it is treated as a Capital Gain/Loss.
  • Taxes (Exclusive Method): If GST or other taxes are credited to a separate account and paid directly to the government, they are generally excluded from the turnover calculation.

Specific Rules for Different Segments

  • For Professionals: The term used is “Gross Receipts,” which includes all fees received for professional services, including out-of-pocket expenses if they are not reimbursed on an actual cost basis.
  • For Share Traders:
    • Delivery-based: The full sale value of the shares is considered turnover.
    • Speculative (Intraday/F&O): The turnover is the sum of absolute profit and absolute loss (e.g., a profit of ₹50,000 and a loss of ₹40,000 equals a turnover of ₹90,000).
  • For Commission Agents: If the agent does not take ownership of the goods, only the commission earned is considered turnover, not the total value of the goods sold on behalf of the principal.

Is there any relaxation in tax audit for certain taxpayers or specific industries

For Assessment Year (AY) 2026-27, while tax audit rules are generally uniform, there are specific relaxations and exemptions available based on the nature of the entity and transaction methods. [1, 2]

1. Sector-Specific Relaxations

Certain industries have separate rules that either simplify or waive the standard audit requirements:
  • Non-Resident Shipping & Aircraft Business: Taxpayers operating under Section 44B (shipping) or Section 44BBA (aircraft) follow a presumptive scheme and are typically exempt from regular tax audit requirements unless they choose to declare lower than prescribed profits.
  • Transport Operators: Under Section 44AE, small truck owners (owning up to 10 vehicles) can opt for presumptive taxation. They only need an audit if they declare profits lower than the prescribed per-vehicle rates and their total income exceeds the taxable limit.
  • Cooperative Societies: If a society’s accounts are already audited under the Cooperative Societies Act, it does not need a separate set of books for income tax. It can submit its existing statutory audit report along with a simplified tax audit report (Form 3CA).

2. General Relaxations for All Industries

The most significant relaxation applies to any business transitioning to digital payments:
  • The 10-Crore Threshold: Any business can avoid a tax audit if its turnover is up to ₹10 Crore, provided that cash receipts and payments do not exceed 5% of total transactions.
  • MSME/Small Business Relief: For those opting for the presumptive scheme (Section 44AD), the turnover limit is relaxed to ₹3 Crore if cash receipts are ≤ 5% of total turnover.

3. Entities with Mandatory Audits (No Relaxation)

Some entities are required to undergo audits regardless of their turnover, often due to their legal constitution: [10]
  • Companies: Every company must undergo a statutory audit under the Companies Act 2013, regardless of its turnover or profit levels.
  • LLPs: An audit is mandatory if the turnover exceeds ₹40 Lakh or the partner’s contribution exceeds ₹25 Lakh.

4. Startups and Special Provisions

  • While startups do not have a specific “tax audit exemption” solely based on their status, many qualify for the ₹10 Crore digital relaxation since most tech-enabled startups operate primarily through non-cash modes.
  • Startups recognized by DPIIT may be eligible for other tax holidays (e.g., Section 80-IAC), but they must still comply with audit requirements to claim these deductions.

Due date for Tax audit and ITR filing for AY 2026-27

For Assessment Year (AY) 2026-27 (relating to Financial Year 2025-26), the following due dates apply for filing tax audit reports and Income Tax Returns (ITR):

1. Tax Audit Report (TAR) Due Dates

  • General Audit Cases: The deadline for a Chartered Accountant to furnish the tax audit report (Form 3CA/3CB and 3CD) is 30th September 2026.
  • Transfer Pricing Cases: For taxpayers required to furnish a report under Section 92E (international or specified domestic transactions), the deadline for the audit report is 31st October 2026. 

2. Income Tax Return (ITR) Filing Due Dates in ca

The ITR deadline depends on the category of the taxpayer and whether an audit is required:
Taxpayer Category ITR Due Date
Audit Required (u/s 44AB) 31st October 2026
Transfer Pricing Cases (u/s 92E) 30th November 2026
Non-Audit Businesses/Professionals (ITR-3 / ITR-4) 31st August 2026
Individuals/Salaried/Non-Audit (ITR-1 / ITR-2) 31st July 2026

3. Post-Deadline Filing

  • Belated Return: If you miss the original deadline, a belated return for AY 2026-27 can be filed up to 31st December 2026. This attracts late fees of ₹5,000 (reduced to ₹1,000 if total income is ≤ ₹5 Lakh).
  • Revised Return: To correct errors in the original return, a revised return can also be filed until 31st March 2027.
  • Updated Return (ITR-U): If both these deadlines are missed, you can file an updated return generally within 48 months from the end of the relevant assessment year, provided certain conditions are met.
Important Note: The tax audit report must be filed at least one month before the ITR filing due date for audited cases.

Penalty if no tax Audit done

For Assessment Year (AY) 2026-27, failure to get your accounts audited or failing to furnish the report by the specified deadline attracts a penalty under Section 271B of the Income Tax Act.

1. Quantum of Penalty

The Assessing Officer may direct the taxpayer to pay a sum equal to
  • 0.5% of the total sales, turnover, or gross receipts.
  • ₹1,50,000.
    Whichever is lower is the maximum penalty leviable.

2. Updated Graded Fee Structure (Budget 2026 )

Under the Finance Act 2026, the penalty is being rationalised into a fixed fee structure to provide more certainty: ]
  • ₹75,000 fee for any delay in filing the audit report up to 30 days.
  • ₹1,50,000 fee if the delay exceeds 30 days.

The above amendments will take effect from the 1st day of April, 2026 and shall apply for tax year 2026-27 and subsequent tax years.. Thus it will not apply for AY 2026-27

3. Exceptions and “Reasonable Cause”

According to Section 273B, no penalty shall be imposed if the taxpayer can prove a reasonable cause for the failure. Common examples include:
  • Professional Issues: Resignation or death of the tax auditor.
  • Unforeseen Events: Natural disasters (floods, fire), civil unrest, or theft of account books.
  • Health: Serious illness of the taxpayer or the primary person in charge of accounts.
  • Other Matters: Delays caused by labor strikes or seizure of books by government authorities. [14, 15, 16, 17]

4. Other Consequences

  • Defective Return: If a mandatory tax audit report is not filed, the Income Tax Return (ITR) may be treated as defective under Section 139(9).
  • Loss of Benefits: You may lose the ability to carry forward certain business losses to future years.

Who Can Conduct a Tax Audit Under the Income Tax Act

Under Section 44AB of the Income Tax Act, 1961, only a practising Chartered Accountant (CA) is authorised to conduct a tax audit.

Eligibility Criteria

  • Qualifications: The auditor must be a “Chartered Accountant” as defined in the Chartered Accountants Act, 1949.
  • Certificate of Practice (COP): The CA must hold a valid, full-time Certificate of Practice.
  • Firm Structure: A firm of Chartered Accountants can also conduct the audit, in which case the report is signed by a partner in the firm’s name.

Who is Specifically Disqualified?

To ensure independence, certain individuals cannot be appointed as tax auditors, even if they are qualified CAs:
  • The Taxpayer: A person cannot audit their own accounts or those of a firm where they are a partner.
  • Internal Auditors: A person already serving as an internal auditor for the business cannot be its tax auditor.
  • Employees & Officers: Current employees or officers of the business are disqualified.
  • Indebted Persons: A CA indebted to the taxpayer for more than ₹10,000 cannot perform the audit.
  • Relative/Substantial Interest: Relatives of the taxpayer or persons with a substantial financial interest in the business are ineligible.

Can Other Professionals Conduct Tax Audits like CS or  Cost Accountants?

  • Cost Accountants (CMA) & Company Secretaries (CS): No. While they can perform other types of audits (like cost or secretarial audits), the Income Tax Act specifically reserves tax audits for Chartered Accountants.

Audit Limits

A single Chartered Accountant can conduct a maximum of 60 tax audits per financial year.

What is Tax audit form  that will be used by CA ?

A Chartered Accountant (CA) uses a combination of forms for a tax audit, depending on whether the taxpayer’s accounts are already audited under another law. For AY 2026-27, the CA will typically file one of two sets: 3CA-3CD or 3CB-3CD.

1. Choosing the Right Audit Report Form

The primary report form is selected based on your entity type:
  • Form 3CA: Used if your accounts are already audited under another law.Common for: Private or Public Limited Companies (audited under the Companies Act 2013) and LLPs.
  • Form 3CB: Used if your accounts are only audited for income tax purposes.
    • Common for: Sole Proprietors and Partnership Firms that are not mandated for audit under any other legislation.

2. The Detailed Annexure (Form 3CD)

Regardless of whether 3CA or 3CB is used, it must be accompanied by Form 3CD.
  • Purpose: It is a 44-clause detailed statement of particulars.
  • What it covers:
    • Part A (Clauses 1–8): Basic details like PAN, address, and the tax regime opted for.
    • Part B (Clauses 9–44): Technical data including method of accounting, depreciation, payments to relatives, and compliance with TDS/GST rules.

3. Specialized Form (Form 3CE)

  • Form 3CE: This is specifically for non-residents or foreign companies who receive income in India through royalties or technical service fees.

Summary of Form Combinations

Scenario Applicable Forms
Companies / LLPs Form 3CA + Form 3CD
Individuals / Partnerships Form 3CB + Form 3CD
Non-Residents (Royalty/FTS) Form 3CE
Filing Process: Your CA will upload these forms using their Digital Signature Certificate (DSC) on the Income Tax e-Filing Portal. You must then “Accept” the uploaded report from your own login to complete the filing.

Can a taxpayer revise a tax audit report after filing?

Yes, a taxpayer can revise a tax audit report (Form 3CA/3CB and 3CD) after filing, but it is generally permitted only under specific, justifiable circumstances.

1. Mandatory Revision Grounds (Rule 6G)

According to Rule 6G(3) of the Income Tax Rules, a report must be revised if certain payments are made after the initial report was furnished that affect your tax liability. These include:
  • Section 40: Payments that necessitate recalculating disallowances, such as late payment of TDS.
  • Section 43B: Payments of statutory dues (like GST, PF, or bonuses) made before the ITR filing deadline but after the audit report was submitted.

2. Other Valid Grounds for Revision

The ICAI Guidance Note on Tax Audit also allows for revisions in certain non-routine cases to ensure accuracy:
  • Correction of Errors: Discovery of unintentional clerical mistakes, software glitches, or data entry errors in the original filing.
  • Revision of Financials: If the underlying books of accounts are reopened and revised (e.g., after an Annual General Meeting for companies).
  • Change in Law: Retrospective amendments in tax laws or new judicial interpretations that impact previous reporting.

3. Key Rules for the Process

  • Time Limit: The revised report must be furnished before the end of the relevant assessment year (e.g., by March 31, 2027, for AY 2026-27).
  • Who Can Revise: Only the original auditor who filed the first report is authorised to issue the revision. A new auditor cannot simply “revise” another CA’s report.
  • Documentation: The new report must explicitly state it is a revised version, reference the original report’s date, and provide a clear reason for the changes.
  • Fresh UDIN: The CA must generate a new UDIN (Unique Document Identification Number) for every revised report.
Note: Revising the audit report does not automatically update your Income Tax Return. You must separately file a Revised ITR (u/s 139(5)) to ensure your return matches the updated audit data.

Can a Chartered Accountant be penalized for incorrect tax audit reporting

Yes, a Chartered Accountant (CA) can be held personally liable and penalized for furnishing incorrect information in a tax audit report. The consequences range from monetary fines to the suspension of their license.

1. Monetary Penalty under Section 271J

If an Assessing Officer or Commissioner finds that a CA has furnished incorrect information in a report or certificate (like the Tax Audit Report), they can direct the CA to pay a penalty of ₹10,000 for each such report.
  • Scope: This penalty applies to each report individually, regardless of the number of errors within that specific report.
  • Defences: The penalty can be waived if the CA proves there was a “reasonable cause” for the error, such as a minor clerical mistake or a software glitch.

2. Professional Misconduct & ICAI Action

Beyond monetary fines, a CA may face disciplinary proceedings by the Institute of Chartered Accountants of India (ICAI) for “professional misconduct.” Common triggers include:
  • Gross Negligence: Failing to exercise due diligence or being negligent in conducting the audit.
  • Insufficient Information: Expressing an opinion without obtaining sufficient data to back it up.
  • Failure to Disclose: Knowingly failing to disclose a material fact in the financial statements or audit report.
Potential Sanctions from ICAI:
  • Reprimand: A formal warning.
  • Fines: Monetary penalties up to ₹1,00,000 or more depending on the severity.
  • Suspension/Removal: Temporary or permanent removal from the Register of Members, which revokes their right to practice.

3. Civil and Criminal Liability

In extreme cases where the incorrect reporting involves deliberate fraud or conspiracy with the taxpayer to evade tax:
  • Section 278: The CA can be prosecuted for abetment of tax evasion, which can lead to rigorous imprisonment and further fines.
  • Civil Suits: The taxpayer may also sue the CA for damages if the incorrect report led to significant financial losses or heavy penalties for the business.

Summary of Risks for CAs

Type of Liability Authority Common Penalty
Statutory Penalty Income Tax Dept ₹10,000 per report (Sec 271J)
Disciplinary Action ICAI Reprimand, Fine, or License Suspension
Criminal Liability Court of Law Imprisonment for abetment (Sec 278)

What is ITR form to be filed in case of Tax Audit

For taxpayers who are required to get a tax audit done, the ITR forms for AY 2026-27 depend on the nature of your legal entity. Since you have a business or profession requiring an audit, you cannot use simplified forms like ITR-1 or ITR-4.
The applicable forms are:

1. ITR-3: For Individuals and HUFs

  • Who uses it: Sole proprietors, freelance professionals, or partners in a firm who have income from a business or profession that requires an audit.
  • Key Detail: This is the most comprehensive form for individuals and allows for the carry forward of business losses and claiming depreciation.

2. ITR-5: For Partnership Firms and LLPs

  • Who uses it: Partnership firms, Limited Liability Partnerships (LLPs), Association of Persons (AOPs), and Body of Individuals (BOIs).
  • Key Detail: If your firm’s turnover exceeds the audit limits, you must file ITR-5 after the CA has uploaded the Tax Audit Report.

3. ITR-6: For Companies

  • Who uses it: All companies (Private Limited, Public Limited, etc.) registered under the Companies Act, except those claiming exemption under Section 11 (charitable/religious trusts).
  • Key Detail: Since companies are mandatory to be audited under both the Companies Act and the Income Tax Act (Form 3CA-3CD), they must always use ITR-6.

Summary Table for Audited Cases

Entity Type Applicable ITR Form Audit Report Combo
Individual / HUF ITR-3 Form 3CB + 3CD
Partnership Firm ITR-5 Form 3CB + 3CD
LLP / Company ITR-5 / ITR-6 Form 3CA + 3CD

Important Filing Rule

In all audited cases, the Tax Audit Report must be filed first (by September 30, 2026). Once the CA uploads the report and you “Accept” it on the portal, you can then proceed to file your ITR (by October 31, 2026). The ITR form will ask for the date of the audit report and the CA’s details (Membership Number and UDIN).

Commonly Asked Questions on Tax Audit in Income Tax

Here are the frequently asked questions related to tax audit under the Income Tax Act which are answered in above article

1. General Questions on Tax Audit

  1. What is a tax audit under the Income Tax Act?
  2. Who is required to get a tax audit done?
  3. Under which section of the Income Tax Act is tax audit required?
  4. What is the turnover limit for a tax audit?
  5. What is the due date for furnishing the tax audit report?
  6. What happens if a taxpayer fails to get a tax audit done?
  7. Is tax audit applicable to professionals?
  8. Is tax audit applicable to individuals and HUFs?
  9. Are LLPs and partnership firms required to get a tax audit?
  10. Are non-residents required to get a tax audit?

2. Questions on Turnover and Presumptive Taxation

  1. How is turnover calculated for tax audit purposes?
  2. Does the tax audit turnover limit include GST?
  3. How is turnover calculated in case of derivatives trading, intraday trading, or F&O transactions?
  4. What is the tax audit requirement for businesses under the presumptive taxation scheme?
  5. What happens if a person under presumptive taxation declares lower income than the prescribed limit?

3. Questions on Tax Audit Reporting and Filing

  1. Which forms are required for tax audit reporting?
  2. What is Form 3CA, Form 3CB, and Form 3CD?
  3. What are the key details required in a tax audit report?
  4. How should the tax audit report be submitted?
  5. Can a taxpayer revise a tax audit report after filing?

4. Questions on Penalty and Compliance

  1. What is the penalty for failure to get a tax audit?
  2. Can the penalty for non-compliance with tax audit be waived?
  3. What if the tax audit is delayed beyond the due date?
  4. Can a Chartered Accountant be penalized for incorrect tax audit reporting?
  5. Is there any relaxation in tax audit for certain taxpayers or specific industries?

5. Miscellaneous Questions

  1. Can an assessee opt out of tax audit in future years?
  2. What is the role of a Chartered Accountant in a tax audit?
  3. Can multiple tax audits be conducted by the same Chartered Accountant?
  4. Are digital records and online transactions included in tax audit?
  5. What are the key changes in tax audit provisions under the Income Tax Bill 2025?

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]]> Tax Audit Limits and Time Limits in New Income ax Act 2025 https://www.taxheal.com/tax-audit-in-new-income-tax-act-2025.html Sat, 15 Feb 2025 05:11:53 +0000 https://www.taxheal.com/?p=99327 Tax Audit and Time Limits for completing a tax audit in New Income tax Act 2025 Tax Audit in New Income Tax Act 2025 : The Income-tax Bill, 2025 outlines specific time limits for completing a tax audit, which are connected to the financial year. The concept of a “tax year” is introduced in the new… Read More »

]]> Tax Audit and Time Limits for completing a tax audit in New Income tax Act 2025

Tax Audit in New Income Tax Act 2025 : The Income-tax Bill, 2025 outlines specific time limits for completing a tax audit, which are connected to the financial year. The concept of a “tax year” is introduced in the new bill, and is tied to the financial year.

Here are the relevant details regarding tax audit time limits as specified in the Income-tax Bill, 2025, presented in a table format for clarity:

As per the Income Tax Bill 2025, the following persons are required to have a tax audit under Section 63:

Persons Required to Do Tax Audit in New Income Tax Act 2025

1. Businesses and Professions Based on Turnover/Gross Receipts

Any person carrying on a business or profession fulfilling the following conditions must get their accounts audited:

Sl. No. Condition for Tax Audit Requirement
1. A person carrying on business where at least 95% of receipts and payments are through specified banking or online mode, and the total sales, turnover, or gross receipts exceed ₹10 crore in a tax year.
2. A person carrying on business, but not covered under point (1), where the total sales, turnover, or gross receipts exceed ₹1 crore in a tax year.
3. A person carrying on profession, where gross receipts exceed ₹50 lakh in a tax year.

2. Presumptive Taxation Cases (Lower Profit Declaration)

A tax audit is also required if an assessee:

  • Declares profits lower than those deemed under presumptive taxation schemes as per Section 58(2) or Section 61(2) (except for cases in Section 61(2) [Table: Sl. No. 6]).

Tax Audit Requirements in case of Presumtive Scheme

Condition Required to Have Tax Audit
If the person is carrying on business or profession referred to in Section 58(2) Yes
If the person is carrying on business or profession referred to in Section 61(2) (other than that referred to in Section 61(2) [Table: Sl. No. 6]) Yes
If profits and gains from such business or profession are claimed to be lower than deemed profits as referred to in these sections Yes

Category Total Turnover or Gross Receipts Presumptive Profit Rate Description
Businessmen

[Resident Individual, HUF, Firm (excluding LLP)]

 (a) Does not
exceed
₹2,00,00,000; or
(b) does not
exceed
₹3,00,00,000,
where the
amount or
aggregate of
amounts
received, in
cash, does not
exceed 5% of
the total
turnover or gross
receipts.		 (A) (i) 6% of total
turnover or gross
receipts realised in
specified banking or
online mode; and
(ii) 8% of total
turnover or gross
receipts realised in
any mode other than
specified banking or
online mode; or
(B) profit claimed
to have been actually
earned,
whichever is higher		 Profits and gains from eligible business are deemed to be 8% (or 6% for digital receipts) of the total turnover or gross receipts for small businesses and professions or or
profit claimed  to have been actually earned,
whichever is higher
Resident Professional (a) Does
not exceed
₹50,00,000; or
(b) does
not exceed
₹75,00,000,
where the
amount or
aggregate of
amounts
received in cash
does not exceed
5% of the total
turnover or gross
receipts.		 50% of the
gross receipts or
profit claimed to have
been actually earned,
whichever is
higher.		 Profits and gains are deemed to be 50% of the gross receipts for specified professions (e.g., legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, authorized representative, film artist).or  profit claimed to have been actually earned,
whichever is higher.

Here is Clause 58 as provided of Income Tax Bill 2025

Clause 58: Special Provision for Computing Profits and Gains of Business or Profession on Presumptive Basis in Case of Certain Residents

  1. The provisions of sections 26 to 54, to the extent contrary to this section, shall not apply to the specified business or profession mentioned in column B of the Table in sub-section (2).
  2. The profits and gains of any specified business or profession as mentioned in column B of the Table below, carried on by an assessee specified in column C of the said Table, having total turnover or gross receipts of business or profession during the tax year specified in column D and computed in the manner specified in column E thereof, shall be deemed to be the profits and gains of such business or profession chargeable to tax under the head “Profits and gains of business or profession”.

Table: Presumptive Taxation Provisions

Sl. No. Specified Business or Profession Assessee Total Turnover or Gross Receipts of Business or Profession During Tax Year Manner of Computation
1 Any business other than the business specified against serial number 2. Eligible assessee. (a) Does not exceed ₹2,00,00,000; or (b) does not exceed ₹3,00,00,000, where the amount or aggregate of amounts received, in cash, does not exceed 5% of the total turnover or gross receipts. (A) (i) 6% of total turnover or gross receipts realised in specified banking or online mode; and (ii) 8% of total turnover or gross receipts realised in any mode other than specified banking or online mode; or (B) profit claimed to have been actually earned, whichever is higher.
2 Business of plying, hiring or leasing goods carriage. An assessee, who owns not more than ten goods carriages at any time during the tax year. (a) The aggregate of income from goods carriage:—

(i) being a heavy goods vehicle, calculated at the rate of ₹1,000 per ton of gross vehicle weight or unladen weight for each vehicle; or

(ii) being a vehicle other than heavy goods vehicle, calculated at the rate of ₹7,500 for each goods carriage for every month or part of a month during which the vehicle is owned by the assessee in the tax year; or (b) income claimed to have been actually earned, whichever is higher.
3 Any profession as referred to in section 62(1)(a). Specified assessee. (a) Does not exceed ₹50,00,000; or

(b) does not exceed ₹75,00,000, where the amount or aggregate of amounts received in cash does not exceed 5% of the total turnover or gross receipts.

 50% of the gross receipts or profit claimed to have been actually earned, whichever is higher.
  1. Any assessee mentioned in column C of the Table in sub-section (2), who claims that––
    (a) the profits or gains actually earned from the specified business or profession are lower than the profits or gains computed in the manner mentioned in column E of the said Table; and
    (b) whose total income exceeds the maximum amount which is not chargeable to tax, shall be required to––
    (i) keep and maintain such books of account and other documents as required under section 62; and
    (ii) get the accounts audited and furnish a report of such audit as required under section 63.
  2. Any loss, allowance or deduction allowable under the provisions of this Act, shall not be allowed against the income computed in the manner specified in sub-section (1).
  3. For the purposes of sub-section (2) (Table: Sl. No. 2), where the assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in section 35(f).
  4. The written down value of any asset of an eligible business or profession shall be deemed to have been calculated as if the assessee had claimed and been allowed the deduction in respect of depreciation for each of the tax years during which the provisions of this section were applicable.
  5. Where an eligible assessee declares profit for any tax year as per the provisions of sub-section (2) (Table: Sl. No. 1) and he declares profit for any of the five tax years succeeding such tax year in contravention of the provisions of sub-section (1), then he shall not be eligible to claim the benefit of the provisions of this section for five tax years subsequent to the tax year in which the profit has not been declared as per the provisions of the said sub-section.
  6. Irrespective of anything contained in the foregoing provisions of this section, where provisions of sub-section (7) are applicable to an eligible assessee and his total income exceeds the maximum amount which is not chargeable to income-tax, he shall be required to keep and maintain such books of account and other documents as required under section 62(2) and get them audited and furnish a report of such audit as required under section 63.
  7. For the purposes of sub-section (2) (Table: Sl. Nos. 1 and 3), the receipt of amount or aggregate of amounts by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the receipt in cash.
  8. In this section––
    (a) “eligible assessee” means an individual, a Hindu undivided family, or a firm other than a limited liability partnership, who––
    (i) has not claimed any deduction under section 141; or
    (ii) has not claimed any deduction under Chapter VIII-C for the relevant tax year; or
    (iii) does not carry on specified profession as defined in section 62(1)(a), and (c); or
    (iv) does not earn any income in the nature of commission or brokerage; or
    (v) does not carry on any agency business;
    (b) “specified assessee” means an individual or a firm, other than a limited liability partnership, who is a resident in India;
    (c) “limited liability partnership” shall have the same meaning as assigned to it in section 2(n) of the Limited Liability Partnership Act, 2008;
    (d) the expressions “goods carriage,” “gross vehicle weight,” and “unladen weight” shall have the same meaning as respectively assigned to them in section 2 of the Motor Vehicles Act, 1988;
    (e) “heavy goods vehicle” means any goods carriage, the gross vehicle weight of which exceeds 12,000 kilograms; and
    (f) an assessee, who is in possession of a goods carriage, whether taken on hire purchase or on installments and for which the whole or part of the amount payable is still due, shall be deemed to be the owner of such goods carriage.

3. Exemptions from Tax Audit

A tax audit is NOT required if:

  • The profits and gains of a business or profession are declared under Section 58(2).
  • The assessee falls under Section 61(2) [Table: Sl. No. 6], with specific income types exempted from tax audit.

4. Additional Compliance for Audit

  • The tax audit report must be furnished one month before the due date for filing the return of income under Section 263(1).
  • If a person is already required to get their accounts audited under any other law, the tax audit requirement will be considered fulfilled if:
    • The audit is conducted before the specified date; and
    • The audit report is submitted along with the income tax return

Meaning of Turnover for Tax Audit under the Income Tax Bill 2025

The term “turnover” for tax audit purposes is not explicitly defined in the Income Tax Bill 2025, but it clause 63 of the bill refers total sales, turnover or gross receipts from business or profession during the tax year .

Tax Year Concept in New Income Tax Act 2025 Explained

When Tax Audit Should be Conducted

 

Sl. No. Condition for Tax Audit Specified Date for Audit Report
1. A person carrying on business where at least 95% of receipts and payments are through specified banking or online mode, and the total sales, turnover, or gross receipts exceed ₹10 crore in a tax year. One month prior to the due date for furnishing the return of income under section 263(1).
2. A person carrying on business, but not covered under point (1), where the total sales, turnover, or gross receipts exceed ₹1 crore in a tax year. One month prior to the due date for furnishing the return of income under section 263(1).
3. A person carrying on profession, where gross receipts exceed ₹50 lakh in a tax year. One month prior to the due date for furnishing the return of income under section 263(1).
4. Profession/ Businessmen Presumtive Scheme (If profits and gains from such business or profession are claimed to be lower than deemed profits as referred to in sections Section 58(2) or Section 61(2) (other than that referred to in Section 61(2) [Table: Sl. No. 6]) One month prior to the due date for furnishing the return of income under section 263(1).
5. Business or Profession where accounts are required to be audited under any other law One month prior to the due date for furnishing the return of income under section 263(1).

Key Points:

  • The “specified date” for the audit report is defined as one month prior to the due date for furnishing the return of income under section 263(1). The due date for furnishing the return of income depends on the category of assessee.
  • Section 63 specifies that a tax audit is required if a person carrying on business or profession exceeds certain thresholds in terms of turnover/receipts. It is also required if the accounts are required to be audited under any other law.
  • Clause 263 of the Income-tax Bill, 2025 outlines the obligation of persons to file a return of income.
  • For a company, the due date for filing the return of income is the 31st of October of the financial year succeeding the relevant tax year.
  • For a person, other than a company, whose accounts are required to be audited, the due date for filing the return of income is also the 31st of October of the financial year succeeding the relevant tax year.
  • The Income Tax Bill 2025 defines a tax year as a period of twelve months within the financial year starting on April 1. For a new business or a new source of income, it will start from the date of set up or the source and end with the financial year.
  • The requirement for a tax audit is based on the person’s income and business activities during the tax year. However, the deadlines are defined by their connection to the financial year.
  • The audit report is to be furnished by the assessee to the Assessing Officer within such period as specified by the Assessing Officer. The Assessing Officer may extend the period for any good and sufficient reason.

It is important to note that while the tax year is the unit period of taxation, the financial year remains relevant for setting the timelines for compliance and other procedural matters, including those related to tax audits.

Due Dates for Filing Income Tax Return (ITR) as per Income Tax Bill 2025

Sl. No. Person / Entity Due Date
1 A company 31st October
2 A person (other than a company) whose accounts are required to be audited under this Act or any other law 31st October
3 A partner of a firm whose accounts are required to be audited under this Act or any other law OR the spouse of such partner (if Section 10 applies) 31st October
4 An assessee (including a partner of a firm or spouse of such partner) who is required to furnish a report under Section 172 30th November
5 Any other assessee (individuals, small businesses, etc., whose accounts are not required to be audited) 31st July

Additional Provisions

  1. Late Filing of Return: If a person fails to file their ITR within the due date, they may still file a belated return within 9 months from the end of the tax year or before the completion of assessment, whichever is earlier.
  2. Revised Return: If a person finds errors in a filed return, they may revise it within 9 months from the end of the tax year or before the completion of assessment, whichever is earlier.
  3. Updated Return: A person may file an updated return within 48 months from the end of the financial year succeeding the tax year in certain cases.

These dates apply as per Section 263 of the Income Tax Bill 2025​.

Due Dates for Tax Audit and ITR Filing Income Tax Bill 2025​.

Sl. No. Category of Taxpayer Due Date for Tax Audit Report (Section 63) Due Date for ITR Filing (Section 263)
1 A company 30th September 31st October
2 A person (other than a company) whose accounts are required to be audited under this Act or any other law 30th September 31st October
3 A partner of a firm whose accounts are required to be audited under this Act or any other law OR the spouse of such partner (if Section 10 applies) 30th September 31st October
4 An assessee (including a partner of a firm or spouse of such partner) who is required to furnish a report under Section 172 (International Transactions & Transfer Pricing Cases) 31st October 30th November
5 Any other assessee (individuals, small businesses, etc., whose accounts are not required to be audited) Not Applicable 31st July

Penalty for Failure to Get Accounts Audited (Clause 446)

If any person fails to get their accounts audited for any tax year or fails to furnish the audit report as required under Section 63, the Assessing Officer may impose a penalty, which shall be the lesser of:

  1. 0.5% of the total sales, turnover, or gross receipts in business, or the gross receipts in profession for such tax year; or
  2. ₹1,50,000 (One Lakh Fifty Thousand Rupees).

This penalty applies to all taxpayers who are mandated to conduct a tax audit under Section 63 but fail to do so​

Here is a comparison between Clause 446 of the Income Tax Bill 2025 and Section 271B of the Income Tax Act, 1961 (as amended by FA 2024):

Possible Relief from Tax Audit Penalty  in New Income Tax Act 2025

 Clause 470 of the Income Tax Bill 2025 provides that a penalty shall not be imposed if there is a reasonable cause for non-compliance.

Thus, if a taxpayer can prove reasonable cause, the tax authorities may decide not to impose the penalty for tax audit non-compliance.

Comparison of Tax Audit Penalty Provisions

Aspect Clause 446 (Income Tax Bill 2025) Section 271B (Income Tax Act, 1961 – FA 2024)
Requirement Failure to get accounts audited or furnish an audit report under Section 63. Failure to get accounts audited or furnish an audit report under Section 44AB.
Penalty Rate 0.5% of total sales, turnover, or gross receipts in business or profession. 0.5% of total sales, turnover, or gross receipts in business or profession.
Maximum Penalty ₹1,50,000 (One Lakh Fifty Thousand Rupees). ₹1,50,000 (One Lakh Fifty Thousand Rupees).
Authority Imposing Penalty Assessing Officer (AO) Assessing Officer (AO)
Applicability Applies to taxpayers required to conduct a tax audit under Section 63 of the Income Tax Bill 2025. Applies to taxpayers required to conduct a tax audit under Section 44AB of the Income Tax Act, 1961.

Key Observations

  • No Change in Penalty Amount: The maximum penalty remains ₹1,50,000, and the rate remains 0.5% of turnover or gross receipts.
  • Structural Change: The provisions have been renumbered (from Section 271B in the Income Tax Act, 1961 to Clause 446 in the Income Tax Bill, 2025).
  • Applicability and Sections Changed: The new law applies under Section 63, whereas the older law applied under Section 44AB.

Conclusion

The substance of the penalty provision remains unchanged in the new law, but it has been restructured and renumbered to align with the revised framework of the Income Tax Bill 2025.

Who Can Conduct a Tax Audit Under the Income Tax Bill 2025?

As per Section 515(3)(b) of the Income Tax Bill 2025, a tax audit must be conducted by an “Accountant.”

Definition of Accountant (Section 515(3)(b))

An “Accountant” means:

  1. A Chartered Accountant (CA) as defined under Section 2(1)(b) of the Chartered Accountants Act, 1949, who holds a valid Certificate of Practice (COP) under Section 6(1) of the Chartered Accountants Act, 1949.
  2. Exclusions: The following persons cannot be considered as an “Accountant” for tax audit purposes:
    • For a Company: A person not eligible for appointment as an auditor under Section 141(3) of the Companies Act, 2013.
    • For Other Assessees:
      • The assessee himself (including partners or members of an HUF, AOP, or firm).
      • A trustee or office bearer of a trust or institution.
      • Any relative of the assessee.
      • An officer or employee of the assessee.
      • A person who has a financial interest (holding securities, being indebted, or providing guarantees) beyond prescribed limits.
      • A person who has a business relationship with the assessee.
      • A person convicted of fraud or penalized under tax laws.

Conclusion

Only a practicing Chartered Accountant (CA) with a valid Certificate of Practice (COP) can conduct a tax audit under Clause 63, subject to the restrictions mentioned above.

Comparison of the Definition of “Accountant” in the Income Tax Act, 1961 (Section 288) and the Income Tax Bill 2025 (Section 515(3)(b))

 

Aspect Section 288 (Income Tax Act, 1961 – Existing Law) Section 515(3)(b) (Income Tax Bill 2025 – New Law)
Definition of Accountant A Chartered Accountant (CA) as per Section 2(1)(b) of the Chartered Accountants Act, 1949, holding a valid Certificate of Practice (COP). A Chartered Accountant (CA) as per Section 2(1)(b) of the Chartered Accountants Act, 1949, holding a valid Certificate of Practice (COP).
Exclusion for Companies A person not eligible to be appointed as an auditor under Section 141(3) of the Companies Act, 2013 cannot act as an accountant for a company. Same as Section 288 – A person not eligible to be appointed as an auditor under Section 141(3) of the Companies Act, 2013 cannot act as an accountant for a company.
Exclusions for Other Assessees The following persons cannot act as an accountant:

1. The assessee himself.

2. Partners or members of an AOP, firm, or HUF

3. Trustees or office bearers of a trust.

4. Persons who can verify returns under Section 140.

5. Relatives of the above persons.

6. Employees or officers of the assessee.

7. A partner or employee of an officer of the assessee.

8. A person holding securities, being indebted, or providing guarantees to the assessee (subject to limits).

9. A person having a business relationship with the assessee.

10. A person convicted of fraud within the last 10 years.

 Same exclusions as Section 288, but with updated references to the Income Tax Bill 2025 sections.

Key Differences & Observations

  1. Definition of “Accountant” Remains the Same
    • Both laws define an accountant as a Chartered Accountant (CA) holding a valid Certificate of Practice.
  2. Exclusions Remain the Same
    • The same restrictions apply to persons who cannot act as an accountant, including partners, employees, relatives, and persons with financial interests in the assessee.

Conclusion

  • Practically, Chartered Accountants (CAs) remain the only professionals authorized to conduct tax audits under both the existing law and the new law.

Key Changes in Tax Audit Provisions: Income Tax Bill 2025 vs. Income Tax Act 1961

The Income Tax Bill 2025 (Clause 63) introduces certain modifications in tax audit provisions compared to Section 44AB of the Income Tax Act, 1961. Below is a comparative analysis:

1. Turnover Limit for Tax Audit

Aspect Income Tax Act, 1961 (Section 44AB) Income Tax Bill, 2025 (Clause 63)
Turnover Limit for Business ₹1 crore (increased to ₹10 crore if 95% transactions are digital) ₹1 crore (increased to ₹10 crore if 95% transactions are digital)
Turnover Limit for Profession ₹50 lakh ₹50 lakh
Presumptive Taxation Lower Profit Cases Tax audit required if profits are declared lower than presumptive taxation scheme under Section 44AD or 44ADA Tax audit required if profits are declared lower than presumptive taxation under Clause 58(2) or Clause 61(2)

✅ No major change in turnover limits, but the applicable section numbers have been renumbered.

2. Due Date for Filing Tax Audit Report

Aspect Income Tax Act, 1961 (Section 44AB) Income Tax Bill, 2025 (Clause 63(5))
Due Date for Filing Tax Audit Report 30th September (One month before the ITR due date) 30th September (One month before the due date of return filing under Clause 263(1)]

✅ No change in the timeline for submission of the audit report.

3. Compliance with Other Laws

Aspect Income Tax Act, 1961 (Section 44AB) Income Tax Bill, 2025 (Clause 63(4))
Tax Audit Compliance with Other Laws If the assessee is required to get accounts audited under any other law (e.g., Companies Act), tax audit is considered done if the same audit report is submitted under Income Tax Act Similar provision retained: If audit is done under another law, the same report can be submitted to satisfy tax audit requirements

✅ No change in the rule allowing tax audits conducted under other laws to fulfill tax audit requirements.

4. Exemptions from Tax Audit

Aspect Income Tax Act, 1961 (Section 44AB) Income Tax Bill, 2025 (Clause 63(2))
Exemptions from Tax Audit Tax audit not required if income is computed under Section 44AD, 44ADA and income is above the threshold Tax audit not required where profits are declared as per Clause 58(2) and Clause 61(2) (except specific cases in Clause 61(2) Table: Sl. No. 6)

✅ Renumbering of sections, but no major change in exemptions.

5. Who Can Conduct a Tax Audit?

Aspect Income Tax Act, 1961 (Section 288 – Explanation) Income Tax Bill, 2025 (Section 515(3)(b))
Who Can Conduct Tax Audit? A Chartered Accountant (CA) holding a valid Certificate of Practice (COP) under the Chartered Accountants Act, 1949 Same requirement – a Chartered Accountant (CA) with a valid COP can conduct a tax audit
Persons Not Eligible to Conduct Tax Audit – Partners, employees, relatives, persons holding financial interest, convicted persons, etc., cannot conduct the audit Same list of ineligible persons retained under Clause 515(3)(b)

✅ No change in eligibility rules for tax auditors.

6. Penalty for Non-Compliance with Tax Audit

Aspect Income Tax Act, 1961 (Section 271B) Income Tax Bill, 2025 (Clause 446)
Penalty Amount 0.5% of turnover or ₹1,50,000, whichever is lower 0.5% of turnover or ₹1,50,000, whichever is lower
Waiver of Penalty Allowed under Section 273B (if reasonable cause is proved) Allowed under Clause 470 (if reasonable cause is proved)

✅ No change in the penalty structure, but the waiver provision is now under Clause 470 instead of Section 273B.

7. Additional Changes

Aspect Income Tax Act, 1961 (Section 44AB) Income Tax Bill, 2025 (Clause 63)
Reporting Requirements Tax audit report to be furnished in Form 3CA/3CB & 3CD Reporting requirements remain, but final forms will be notified by the government later
Digital Payments Incentive ₹10 crore tax audit limit applied if 95% transactions are digital Same provision retained
ITR Filing Due Date Linkage Tax audit report due one month before ITR due date Tax audit report due one month before ITR due date (Clause 263(1))

No major changes except renumbering of sections.

Conclusion: What Has Changed?

  1. No Major Structural Changes
    • Tax audit applicability, turnover limits, penalties, and exemptions remain the same.
    • The provisions have only been renumbered, making it easier to follow under the new law.
  2. Renumbering of Sections
    • Section 44AB → Clause 63
    • Section 271B (Penalty for non-compliance) → Clause 446
    • Section 273B (Penalty waiver) → Clause 470
  3. Reporting and Compliance Requirements Remain the Same
    • The due date for tax audit report filing remains one month before the ITR due date.
    • Tax audits under other laws (e.g., Companies Act) will still be accepted.
  4. Penalty Waiver Provision Shifted to Clause 470
    • Previously under Section 273B, now under Clause 470.

Final Verdict

✅ Minimal changes in tax audit provisions in the new Income Tax Bill 2025—mostly renumbering and simplifications.

Commonly Asked Questions on Tax Audit in Income Tax

Here are the frequently asked questions related to tax audit under the Income Tax Act:

1. General Questions on Tax Audit

  1. What is a tax audit under the Income Tax Act?
  2. Who is required to get a tax audit done?
  3. Under which section of the Income Tax Act is tax audit required?
  4. What is the turnover limit for a tax audit?
  5. What is the due date for furnishing the tax audit report?
  6. What happens if a taxpayer fails to get a tax audit done?
  7. Is tax audit applicable to professionals?
  8. Is tax audit applicable to individuals and HUFs?
  9. Are LLPs and partnership firms required to get a tax audit?
  10. Are non-residents required to get a tax audit?

2. Questions on Turnover and Presumptive Taxation

  1. How is turnover calculated for tax audit purposes?
  2. Does the tax audit turnover limit include GST?
  3. How is turnover calculated in case of derivatives trading, intraday trading, or F&O transactions?
  4. What is the tax audit requirement for businesses under the presumptive taxation scheme?
  5. What happens if a person under presumptive taxation declares lower income than the prescribed limit?

3. Questions on Tax Audit Reporting and Filing

  1. Which forms are required for tax audit reporting?
  2. What is Form 3CA, Form 3CB, and Form 3CD?
  3. What are the key details required in a tax audit report?
  4. How should the tax audit report be submitted?
  5. Can a taxpayer revise a tax audit report after filing?

4. Questions on Penalty and Compliance

  1. What is the penalty for failure to get a tax audit?
  2. Can the penalty for non-compliance with tax audit be waived?
  3. What if the tax audit is delayed beyond the due date?
  4. Can a Chartered Accountant be penalized for incorrect tax audit reporting?
  5. Is there any relaxation in tax audit for certain taxpayers or specific industries?

5. Miscellaneous Questions

  1. Can an assessee opt out of tax audit in future years?
  2. What is the role of a Chartered Accountant in a tax audit?
  3. Can multiple tax audits be conducted by the same Chartered Accountant?
  4. Are digital records and online transactions included in tax audit?
  5. What are the key changes in tax audit provisions under the Income Tax Bill 2025?

These questions cover tax audit applicability, compliance, penalties, and procedural aspects.

refer

Tax Audit in New Income Tax Act 2025

]]> TAX AUDIT NEW LIMITS & LAST DATE FOR TAX AUDIT AY 2024- 25 PENALTY https://www.taxheal.com/tax-audit-new-limits-last-date-for-tax-audit-ay-2024-25-penalty.html Fri, 22 Mar 2024 07:33:49 +0000 https://www.taxheal.com/?p=95683 TAX AUDIT NEW LIMITS & LAST DATE FOR TAX AUDIT AY 2024- 25 I PENALTY I INCOME TAX UPDATE

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]]> Tax Audit New Change MSME payment new update 43bh AY 2024-25 I INCOME TAX CA Satbir Singh https://www.taxheal.com/tax-audit-new-change-msme-payment.html Thu, 21 Mar 2024 08:32:44 +0000 https://www.taxheal.com/?p=95681 Tax Audit New Change MSME payment new update 43bh AY 2024-25 I INCOME TAX CA Satbir Singh

]]> Tax Audit New Change MSME payment new update 43bh AY 2024-25 I INCOME TAX CA Satbir Singh

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