Tax Audit: Who Needs It, Limits and Due Date (Income-tax Act, 2025)
Under section 63 of the Income-tax Act, 2025, a person carrying on business must get the accounts audited by a chartered accountant if business turnover exceeds Rs 1 crore in a tax year. The limit rises to Rs 10 crore when cash receipts and cash payments are each within 5%. A professional must get an audit if gross receipts exceed Rs 50 lakh. The audit report is due one month before the income-tax return due date.
This guide covers who needs a tax audit, how the cash test works, the presumptive-scheme trigger, the due date, the form, and the fee for missing it. Every figure comes from the Act (as amended by the Finance Act, 2026, effective 1 April 2026) and the Income-tax Rules, 2026, with the section or rule number beside it. If you know this requirement under the 1961 Act, check the old-law mapping separately; this article does not name it. Last reviewed on 10 November 2026.
What is a tax audit under the Income-tax Act, 2025?
A tax audit is an audit of the books of account of a business or profession by an "accountant", filed with the tax department as a report. Section 515(3)(b) defines an accountant as a chartered accountant under the Chartered Accountants Act, 1949 who holds a valid certificate of practice. It is separate from a statutory audit under the Companies Act or any other law, although section 63(4) lets one audit serve both purposes (covered below).
Who needs a tax audit? The limits at a glance
| Who | Condition (section 63(1), Table) | Audit needed when |
|---|---|---|
| Business, general rule (Sl. No. 1(a)) | Total sales, turnover or gross receipts in business | Exceed Rs 1 crore in any tax year |
| Business, low-cash rule (Sl. No. 1(b)) | Cash receipts within 5% of total receipts, and cash payments within 5% of total payments | Turnover exceeds Rs 10 crore (the Rs 1 crore limit is read as Rs 10 crore) |
| Profession (Sl. No. 1(c)) | Gross receipts in profession | Exceed Rs 50 lakh in any tax year |
| Presumptive scheme user (Sl. No. 2) | Business or profession under section 58(2) or 61(2) (Sl. Nos. 4 and 5), profit claimed lower than the deemed profit | Whenever the claim is lower than the deemed profit |
The limits apply to each tax year separately. The Rs 1 crore and Rs 50 lakh limits use the word "exceed", so turnover of exactly Rs 1 crore does not trigger an audit.
How does the Rs 10 crore limit with the 5% cash test work?
Section 63(1), Table Sl. No. 1(b) gives a higher limit to businesses that deal mostly through banks. Both of these must hold for the tax year:
- the total of all amounts received in cash does not exceed 5% of all amounts received (including sales, turnover or gross receipts); and
- the total of all payments made in cash, including amounts incurred as expenditure, does not exceed 5% of all payments made.
If either test fails, the limit stays at Rs 1 crore. Section 63(5)(b) adds a trap: a receipt or payment by a cheque drawn on a bank, or by a bank draft, that is not account payee is treated as cash for this test.
Worked example 1: does a trader with Rs 4.8 crore turnover need an audit?
Assumptions (tax year 2026-27): Ravi is a trader. He is not under a presumptive scheme.
| Item | Figure | Working |
|---|---|---|
| Turnover | Rs 4,80,00,000 | Above Rs 1 crore, so check the cash test |
| Cash receipts | Rs 18,00,000 | 18,00,000 / 4,80,00,000 = 3.75% |
| Total payments | Rs 4,20,00,000 | |
| Cash payments | Rs 15,00,000 | 15,00,000 / 4,20,00,000 = 3.57% |
| Both within 5%? | Yes | Limit becomes Rs 10 crore |
| Result | Rs 4.8 crore is below Rs 10 crore, so no audit under Sl. No. 1 | |
Worked example 2: what if the cash share is just over 5%?
Assumptions (tax year 2026-27): Meena runs a wholesale business with turnover of Rs 2,40,00,000. Her cash payments are within 5%.
- 5% of Rs 2,40,00,000 = Rs 12,00,000. This is the most she can receive in cash and keep the Rs 10 crore limit.
- Cash receipts during the year: Rs 8,00,000.
- Customer cheques that were not account payee: Rs 4,50,000. Under section 63(5)(b) these count as cash.
- Deemed cash receipts: 8,00,000 + 4,50,000 = Rs 12,50,000, which is above Rs 12,00,000 (5.21%).
- The 5% test fails, so the limit stays at Rs 1 crore. Turnover of Rs 2.4 crore exceeds it, and Meena needs a tax audit.
Without the Rs 4,50,000 of non-account-payee cheques, her cash share would have been 3.33% and she would not have needed an audit. How a receipt is banked can decide the outcome.
Does a professional need a tax audit?
Yes, if gross receipts in the profession exceed Rs 50 lakh in the tax year (Sl. No. 1(c)). The Rs 10 crore cash-test relaxation applies only to "business" in clause (b), not to a profession.
Real-life example. Dr. Anita runs a clinic and received Rs 62 lakh in fees in 2026-27. Her gross receipts exceed Rs 50 lakh, so she must get her accounts audited, even though most fees came by UPI and bank transfer. A colleague with Rs 48 lakh in receipts has no audit under Sl. No. 1(c).
Does using the presumptive scheme remove the audit requirement?
Section 63(2) says the section does not apply where the profit declared is as per section 58(2) or 61(2). So a small business that declares the deemed profit under the presumptive scheme does not need an audit, even if its turnover is above Rs 1 crore.
The audit returns when the person claims a profit lower than the deemed profit (Sl. No. 2). Section 58(3) links this to income: where the person's total income exceeds the maximum amount not chargeable to tax, books must be kept under section 62 and an audit done under section 63. Section 58(7) and (8) bring in the same audit for an eligible assessee who declares a lower profit within five tax years after using the scheme for a year.
Real-life example. Kiran, a retail trader, has turnover of Rs 1.8 crore and a cash share well within the Act's presumptive limits. In 2026-27 he declares profit as per section 58(2), Table Sl. No. 1, so no audit is needed. In 2027-28 his business has a bad year and he wants to report a lower profit. He must now keep books and get an audit, as long as his total income is above the maximum amount not chargeable to tax. He should also check whether section 58(7) stops him from using the scheme for the next five tax years.
What are the presumptive scheme limits that keep you out of a tax audit?
The audit exemption in section 63(2) only helps if you first qualify for the scheme in section 58(2). The Table there sets these limits:
| Who (section 58(2), Table) | Turnover or receipts limit | Minimum profit to declare |
|---|---|---|
| Eligible assessee, business (Sl. No. 1) | Rs 2 crore; or Rs 3 crore if cash receipts do not exceed 5% of turnover | 6% of turnover received by specified banking or online mode, plus 8% of the rest, or actual profit if higher |
| Specified assessee, specified profession (Sl. No. 3) | Rs 50 lakh; or Rs 75 lakh if cash receipts do not exceed 5% of gross receipts | 50% of gross receipts, or actual profit if higher |
Three details from section 58 matter for the audit question. A cheque that is not account payee counts as cash for the 5% test (section 58(9)). An "eligible assessee" is a resident individual, HUF or firm other than an LLP, so a company or LLP cannot use Sl. No. 1 (section 58(11)). And a person in the goods-carriage business under Sl. No. 2 is outside sections 62 and 63 for that business, and its receipts are left out when the monetary limits are computed (section 58(10)).
Is a tax audit needed if the business made a loss?
Yes, it can be. For a business, section 63(1), Table Sl. No. 1 looks at total sales, turnover or gross receipts, not at profit. A trader with turnover above Rs 1 crore who is not under the presumptive scheme falls within the audit rule even if the year ends in a loss. Under the presumptive scheme, a loss or low profit is itself the trigger, but the audit applies only where total income exceeds the maximum amount not chargeable to tax (section 58(3)(b)).
Which professions count, and what if I have both business and profession?
Section 62(4) lists the "specified profession": legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology and company secretary, plus any other profession notified by the Board. The section 63 Table tests business turnover (Sl. No. 1(a) and (b)) and professional gross receipts (Sl. No. 1(c)) in separate lines, so the Rs 1 crore or Rs 10 crore figure is read against business receipts and the Rs 50 lakh figure against professional receipts. If either line is crossed, the accounts must be audited.
What is the due date for the tax audit report?
Section 63(5)(a) defines the "specified date" as the date one month before the due date for the return of income under section 263(1). Section 63(1) requires the accounts to be audited, and section 63(3) requires the report to be furnished, by that date.
| Person (section 263(1)(c), Table) | Return due date | Audit report due (one month earlier) |
|---|---|---|
| Assessee whose accounts are required to be audited under the Act or any other law (Sl. No. 2(ii)), where section 172 does not apply | 31 October | 30 September |
| Assessee to whom section 172 applies (international or specified domestic transactions) (Sl. No. 1) | 30 November | 30 October |
| Non-audit business or profession cases (Sl. No. 3) | 31 August | Not applicable, no audit |
The October and November dates fall in the financial year after the tax year. The one-month-earlier dates in the last column are worked out from section 63(5)(a); the Act gives the rule, not a printed date.
What if my accounts are already audited under another law?
Section 63(4) says that if another law already requires an audit of the accounts, that is enough, provided the person (a) gets the accounts audited under that law before the specified date and (b) furnishes by that date the audit report together with the accountant's report in the prescribed form. For an assessee required by or under another law to get accounts audited, rule 47(1)(a) puts the report in Part A of Form No. 26. Anyone else who needs an audit uses Part B (rule 47(1)(b)). Rule 47(2) says the particulars required under section 63 also go in Parts C and D.
Which form is the audit report filed in?
| Situation | Form | Rule |
|---|---|---|
| Tax audit under section 63, books also audited under another law | Form No. 26, Part A (plus Parts C and D) | Rule 47(1)(a), 47(2) |
| Tax audit under section 63, no other audit law | Form No. 26, Part B (plus Parts C and D) | Rule 47(1)(b), 47(2) |
| Slump sale under section 77(4): accountant's report | Form No. 28, before the section 63 specified date | Rule 54 |
| Deduction claims under sections 46, 138 to 144: audit of the eligible business | Form No. 32, before the section 63 specified date | Rule 66 |
Rule 47(3) lets the report be revised by obtaining a revised report from an accountant. It must be furnished before the end of the financial year following the tax year, and only where a later payment forces a recalculation of the disallowance under section 35 or section 37.
What happens if I miss the tax audit?
Three consequences follow from the text:
- Fee under section 428(c). Failing to get accounts audited and furnish the report as required under section 63 attracts a fee of Rs 75,000 for a delay up to one month, and Rs 1,50,000 thereafter.
- Defective return under rule 166(1)(b). A return is treated as defective if the audit report, in auditable cases, has not been furnished before the return is filed.
- Electronic tax payment under rule 333. A person to whom section 63 applies, other than a company, must pay tax, interest, fee and penalty electronically, by internet banking or a credit or debit card.
Real-life example. Suresh is a contractor whose 2026-27 turnover crosses Rs 1 crore with cash receipts above 5%. His chartered accountant is travelling and the report goes in ten days after 30 September 2027. He is one month or less late, so the fee under section 428(c)(i) is Rs 75,000. If it were two months late, the fee would be Rs 1,50,000. In both cases the return cannot be treated as filed in good order until the audit report is in.
Common mistakes
- Reading the cash test as a single test. The Rs 10 crore limit needs cash receipts and cash payments each within 5%. Passing one is not enough.
- Forgetting that non-account-payee cheques count as cash. Section 63(5)(b) applies to receipts and payments both.
- Applying the Rs 10 crore limit to a professional. The profession limit is Rs 50 lakh gross receipts, with no cash-test relaxation.
- Assuming the presumptive scheme always avoids an audit. The audit applies when the claimed profit is lower than the deemed profit.
- Treating 31 October as the audit date. The report is due one month earlier. Filing the return first leaves it defective under rule 166(1)(b).
- Counting only some income streams. The limits are on turnover or gross receipts of the business or profession, so check the figure from the books, not profit.
Quick reference
| Item | Rule | Where |
|---|---|---|
| Business audit limit | Turnover above Rs 1 crore | Section 63(1), Sl. No. 1(a) |
| Business limit with low cash use | Rs 10 crore, if cash receipts and payments are each within 5% | Section 63(1), Sl. No. 1(b) |
| Profession limit | Gross receipts above Rs 50 lakh | Section 63(1), Sl. No. 1(c) |
| Report due | One month before the return due date | Section 63(5)(a) |
| Form | Form No. 26 | Rule 47 |
| Fee for default | Rs 75,000 up to one month, Rs 1,50,000 after | Section 428(c) |
Where this is in the Act
- Section 63: tax audit (conditions, report, other-law audits, specified date, non-account-payee cheques)
- Section 58(2), 58(3), 58(7), 58(8): presumptive scheme and the audit trigger; section 61(2) for non-residents
- Section 62: books of account and the definition of specified profession
- Section 263(1)(c): return due dates that fix the audit date
- Section 428(c): fee for failing to get accounts audited
- Section 515(3)(b): who is an accountant
- Rules 47, 54, 66: forms for the audit and related reports; rule 166(1)(b): defective return; rule 333: electronic payment
Tax audit is one part of the business-income picture. If you also want to see how deductions work, read our guide on business income and deductions under the 2025 Act. For the TDS side of compliance, see TDS on rent under the Income-tax Act, 2025.
For a CA firm, the hard part is rarely the audit itself. It is knowing which clients cross the limit this year, which are waiting on bank statements, and which reports are due before 30 September. Finexo's practice management software lets you track due dates and client documents for your whole client book in one place. It does not carry out the audit or file the report.
This article is for information and is not tax advice. Confirm the position for a specific case with a chartered accountant.
Frequently Asked Questions
What is the tax audit limit for business under the Income-tax Act, 2025?
Under section 63(1), Table Sl. No. 1(a), a business needs a tax audit if total sales, turnover or gross receipts exceed Rs 1 crore in a tax year. If cash receipts and cash payments are each within 5%, the limit is Rs 10 crore under Sl. No. 1(b).
What is the tax audit limit for professionals?
A professional needs a tax audit if gross receipts in the profession exceed Rs 50 lakh in a tax year (section 63(1), Table Sl. No. 1(c)). The Rs 10 crore cash-test relaxation does not apply to professions.
What is the due date for the tax audit report?
The specified date is one month before the due date of the return under section 263(1) (section 63(5)(a)). For an assessee whose accounts must be audited, with section 172 not applying, the return is due on 31 October, so the report is due by 30 September.
Do cheques that are not account payee count as cash?
Yes. Under section 63(5)(b), a payment or receipt by a cheque drawn on a bank, or by a bank draft, that is not account payee is treated as cash. This matters for the 5% test that decides whether the Rs 10 crore limit applies.
What is the fee for not getting accounts audited?
Under section 428(c), the fee is Rs 75,000 for a delay of up to one month and Rs 1,50,000 after that. The return is also treated as defective if the audit report is not furnished before the return is filed (rule 166(1)(b)).
Is a tax audit needed if I declare profit under the presumptive scheme?
Not if the profit declared is as per section 58(2) or 61(2) (section 63(2)). An audit is needed when the profit claimed is lower than the deemed profit under those sections (section 63(1), Table Sl. No. 2).
Is a tax audit required if my business shows a loss?
It can be. For a business outside the presumptive scheme, section 63(1), Table Sl. No. 1 depends on turnover or gross receipts, not profit, so turnover above the limit needs an audit even in a loss year. Under the presumptive scheme, a lower profit claim triggers an audit only if total income exceeds the maximum amount not chargeable to tax (section 58(3)).
What are the presumptive scheme limits for business and professionals?
Under section 58(2), Table Sl. No. 1, an eligible business can use the scheme up to Rs 2 crore, or Rs 3 crore if cash receipts are within 5%. A specified profession under Sl. No. 3 can use it up to Rs 50 lakh, or Rs 75 lakh if cash receipts are within 5%, declaring 50% of gross receipts.