A tax audit is required in three situations. The first is a business whose turnover crosses ₹1 crore in the year, or ₹10 crore if it runs almost entirely on non-cash transactions. The second is a professional whose gross receipts cross ₹50 lakh. The third is a presumptive-scheme taxpayer who declares profit below the deemed rate or leaves the scheme early. Below those lines, income tax law does not require an audit. A company still has its statutory audit under the Companies Act, which is separate.
The audit requirement moved from section 44AB of the 1961 Act to section 63 of the Income-tax Act, 2025. The department’s forms FAQ states that the thresholds are unchanged. What changes is the report form, and that change starts with income earned from 1 April 2026. Audited or not, the return still has to follow. Complianto’s income tax return service prepares and files it once the accounts, and any audit report, are final.
The thresholds, side by side
| Situation | Audit required when |
|---|---|
| Business, ordinary case | Total sales, turnover or gross receipts exceed ₹1 crore |
| Business with low cash use | Turnover exceeds ₹10 crore, where cash receipts are within 5% of total receipts and cash payments within 5% of total payments |
| Profession | Gross receipts exceed ₹50 lakh |
| Presumptive taxpayer | Profit declared is lower than the presumptive rate, or the person opts out of the scheme and income exceeds the basic exemption limit (see below) |
How the ₹10 crore test works in practice
The higher limit applies only if both cash conditions hold for the whole year. Cash receipts must be no more than 5% of all receipts, and cash payments no more than 5% of all payments. Take, for example, a distributor with ₹6 crore of turnover, all collected by bank transfer. If more than 5% of its payments are in cash, such as wages and transport, it fails the test and needs an audit at ₹1 crore. Keep a running cash-versus-bank split in your books through the year, not only at year-end.
Professionals
Doctors, lawyers, architects, consultants and other specified professionals are audited above ₹50 lakh of gross receipts. A professional using the presumptive scheme (50% of receipts treated as income) avoids audit up to the scheme’s limit, which the ITR-4 FAQ gives as ₹50 lakh, or ₹75 lakh where cash receipts are within 5%. This holds only while they declare at least the presumptive income.
Presumptive cases: the trap
Presumptive taxation exists to spare small businesses from detailed books and audit. Under the 1961 Act, that protection fell away in two cases. One was declaring profit below the presumptive rate when income exceeded the basic exemption limit. The other was leaving the business scheme within five years of opting in. In either case, books and an audit were required even at turnover far below ₹1 crore. The 2025 Act merges the schemes into section 58, as the new-Act FAQ explains. Practitioners are still debating whether its wording requires an audit in every lower-profit case, regardless of turnover. If you plan to declare less than the presumptive rate for 2026-27, settle this with your auditor early.
Which report form, and when
| Income year | Report form | Due date |
|---|---|---|
| 2025-26 (AY 2026-27, 1961 Act) | Form 3CA with 3CD, if accounts are already audited under another law such as the Companies Act; otherwise Form 3CB with 3CD | 30 September 2026, extended to 21 October 2026 |
| Tax year 2026-27 (2025 Act) | Form 26, which merges the three old forms into one report | 30 September 2027 |
The extension for 2025-26 comes from CBDT Circular 7/2026. The same circular moves the return due date for audit cases to 21 November 2026. The forms FAQ confirms that reports for 2025-26 use the old forms even when filed after 1 April 2026. For tax year 2026-27, Form 26 also asks for the auditor’s membership number, firm registration number and UDIN.
The audit report is uploaded by the auditor on the e-filing portal and accepted by the taxpayer before the return is filed. Leaving that step to the final day is how many audited businesses miss the return date.
What if the audit is missed?
Failing to get accounts audited, or to furnish the report by the specified date, can attract a penalty calculated on turnover, subject to a cap. A reasonable cause defence can help. A return filed without a required audit report may also be treated as defective. If your 2025-26 report missed 21 October 2026, get it done and filed before the return, and take advice on the penalty position.
Frequently asked questions
My private limited company has ₹40 lakh turnover. Does it need a tax audit?
Not under income tax, because it is below ₹1 crore. Its accounts are still audited under the Companies Act. Where a tax audit does apply to a company, Form 3CA is used for 2025-26.
Can a tax audit be done by anyone other than a chartered accountant?
No. The report must be signed by a chartered accountant in practice.
Complianto (complianto.in), operated by Mentorcorp Private Limited, is a private consultancy and is not affiliated with any government body. We do not issue official documents. We charge a professional fee for application assistance and advisory services. Applicants can apply directly to the government without our fees via the official portals: MCA (mca.gov.in), Income Tax (incometax.gov.in), GST (gst.gov.in), MSME (udyamregistration.gov.in), FSSAI (foscos.fssai.gov.in), Startup India (startupindia.gov.in), and IP India (ipindia.gov.in).
This article is general information, not legal or tax advice.
