Tax audit: who needs it and what to prepare

Which law applies to a tax audit right now?

For accounts of FY 2025-26 (AY 2026-27), section 44AB of the Income-tax Act, 1961 applies, even if the report is signed after 1 April 2026. For tax year 2026-27 onwards, the Department's Form 26 FAQ describes section 63 of the Income-tax Act, 2025 and Form 26 under Rule 47 of the Income-tax Rules, 2026.

Circular No. 07/2026 itself refers to section 44AB for AY 2026-27. The Department's transition FAQs likewise say that a report for FY 2025-26 stays on the old forms even if it is furnished after 1 April 2026.

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Who needs a tax audit?

A tax audit is generally required where business turnover or gross receipts, or professional gross receipts, exceed limits in the law, or where certain presumptive-income conditions are not met. The Department's FAQs give the business limit as ₹1 crore, raised to ₹10 crore where cash receipts and cash payments are each within 5%, and the professional limit as ₹50 lakh.

• Business: total sales, turnover or gross receipts above ₹1 crore in the year; the limit is ₹10 crore where cash receipts do not exceed 5% of total receipts and cash payments do not exceed 5% of total payments.
• Profession: gross receipts above ₹50 lakh in the year. The ₹10 crore relaxation is for business only.
• Cash test: the Department's section 44AB material treats a cheque or draft that is not account payee as cash for the 5% test.

The Form 26 FAQ states that the tax audit thresholds under section 63 are the same as under section 44AB. Taxpayers who adopt, or opt out of, the presumptive schemes can be drawn into or kept out of audit depending on the conditions in those schemes. The briefs on section 44AB triggers and the presumptive scheme for professionals discuss that interplay. Read the limits in the statute text on the Department's section 44AB page before relying on any figure, as limits can be amended.

What is the tax audit due date?

For AY 2026-27, CBDT Circular No. 07/2026, dated 28 September 2026, extended the specified date for furnishing the audit report from 30 September 2026 to 21 October 2026. It also extended the return due date from 31 October 2026 to 21 November 2026. Both extensions apply to persons at serial 2 of the table in the circular.

The circular says the audit date stands extended "in terms of clause (ii) of Explanation to section 44AB". The table in the circular identifies the persons covered, so read it to see whether it applies to a particular taxpayer. The e-filing portal's ITR guidance says audit reports are furnished one month before the due date under section 139(1). For tax year 2026-27 the Form 26 FAQ links the date to section 63 and the return due date; check the current date on the portal when the time comes, since dates can be extended again.

What are the audit report forms?

Under the 1961 Act, Form 3CA applies where the accounts are already audited under another law and Form 3CB where they are not; Form 3CD, the statement of particulars, accompanies both. According to the Department's Form 26 FAQ, Form 26 merges these for tax year 2026-27 onwards.

• Parts A and B of Form 26 correspond to the earlier Form 3CD.
• Part C corresponds to Form 3CA (accounts audited under another law).
• Part D corresponds to Form 3CB (accounts not audited under another law).

The FAQ also states that the old forms continue for tax audits of previous years relevant to assessment years up to 2026-27. The 2025-Act form does not apply to AY 2026-27. The Form 26 page on the Department's site carries the form and its instructions.

What records should be ready before the audit starts?

Auditors work from the books and supporting records, so the most useful preparation is complete, reconciled books. A typical request covers the items below, such as bank reconciliations, GST and TDS tie-outs, asset registers and loan confirmations, though each engagement has its own list and the auditor's instructions govern.

• Final trial balance, ledgers and financial statements for the year
• Bank statements and bank reconciliations for every account
• Sales and purchase registers tied to GST returns
• Fixed asset register with additions, deletions and depreciation workings
• Loan confirmations, interest calculations and related-party details
• TDS deducted and deposited, with challans and quarterly statements
• Cash payments and expenses paid in cash, listed with dates
• Stock records and valuation method
• Details of payments to micro and small enterprises
• Statutory dues paid or outstanding (GST, provident fund, ESI, professional tax)
• Previous year's audit report and return for continuity

Digital books also carry audit-trail considerations; see the note on audit trail in accounting software.

What happens after the report is signed?

The audit report is furnished electronically on the e-filing portal, and the return then reports that the accounts were audited. The steps and utilities change from year to year, so check the current instructions on incometax.gov.in before the upload, and keep the signed report and working papers ready for any later query.

Planning backwards from the due date helps: finalise the books, reconcile GST and TDS, review the auditor's queries, then allow time for signing and upload.

Last reviewed: 15 October 2026

Sources

• CBDT Circular No. 07/2026, 28 September 2026 (e-filing portal copy)
• Form No. 26 FAQs, Income Tax Department
• Form No. 26, Income Tax Department
• Section 44AB, Income Tax Department
• FAQs on the transition to the Income-tax Act, 2025
• ITR applicability and audit form references, e-filing portal
• Income Tax e-filing portal