Section 63 — Tax Audit | ITA 2025

Section 63 — TAX AUDIT

Section 63 is the substantive equivalent of 1961 s. 44AB. It mandates audit of accounts by a Chartered Accountant for: (i) businesses with turnover > ₹ 1 crore (or ₹ 10 crore where cash-receipts and cash-payments each ≤ 5%); (ii) professions with gross receipts > ₹ 50 lakh; (iii) presumptive assessees (s. 58(2) Sl. Nos. 4-5 / s. 61(2)) declaring lower profits than deemed profits. Audit-report due-date is one month BEFORE return-of-income due-date u/s 263(1). Report furnished in Form 3CA/3CB read with Form 3CD (per Income-tax Rules, 2026).

Statutory text — Income-tax Act, 2025

Marginal note — Tax audit

(1) Every person, carrying on the business or profession fulfilling any of the conditions specified in column B of the Table below, shall get his accounts of the tax year audited by an accountant, before the specified date.

Section 63(1) — Tax-Audit Trigger Table (rendered as Word Table)

Sl. No. (A)

Conditions for getting books of account audited (B)

Every person—

(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any tax year, subject to the provisions of clause (b);

(b) in case of a person whose—

(i) aggregate of all amounts received including amount received for sales, turnover or gross receipts during the tax year, in cash, does not exceed 5% of the said amount; and

(ii) aggregate of all payments made including amount incurred for expenditure, in cash, during the tax year does not exceed 5% of the said payment,

clause (a) shall have effect as if for the words “one crore rupees”, the words “ten crore rupees” had been substituted;

(c) carrying on profession shall, if his gross receipts in profession exceed fifty lakh rupees in any tax year.

If the person is carrying on business or profession, referred to in section 58(2) or 61(2) (Table: Sl. Nos. 4 and 5) and the profits and gains from such business or profession are claimed to be lower than the deemed profits as referred to in the said sections.

(2) The provisions of this section shall not apply where profits and gains of business or profession, declared by the assessee are as per section 58(2) or 61(2).

(3) The assessee shall furnish by the specified date, the report of such audit in such form, duly signed and verified by the accountant and setting forth such particulars, as may be prescribed.

(4) Where a person is required, by or under any other law, to get his accounts audited, then it shall be sufficient compliance of this section, if such person—

(a) gets the accounts of such business or profession audited under such law before the specified date; and

(b) furnishes by that specified date the report of such audit along with the report of the accountant in the form as may be prescribed.

(5) For the purposes of this section,—

(a) “specified date” in relation to the accounts of the assessee of the tax year, means the date one month prior to the due date for furnishing the return of income under section 263(1);

(b) the payment or receipt, as the case may be, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the payment or receipt, as the case may be, in cash.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 — s. 63	INCOME-TAX ACT, 1961 — s. 44AB
Business turnover threshold ₹ 1 cr / ₹ 10 cr (cash ≤ 5% test)	1961 s. 44AB(a) read with FA 2020 increase
Profession threshold ₹ 50 lakh	1961 s. 44AB(b)
Presumptive opt-out: lower-than-deemed profit triggers audit	1961 s. 44AB(d) / (e)
Carve-out where another statutory audit done before specified date	1961 s. 44AB proviso (1)
Specified date — one month before s. 263 return due date	1961 s. 44AB Explanation (ii)
Non-account-payee cheque / DD deemed cash	1961 s. 44AB Explanation (iii)

STATUTORY ARCHITECTURE

Sub-section (1) Table — two trigger sources: (a) turnover-based threshold; (b) presumptive opt-out trigger. Cash-test (Sl. No. 1(b)) — both cash-receipts AND cash-payments each ≤ 5% of total. Failure of either test reverts threshold to ₹ 1 crore. Sub-section (2) — relief for assessees declaring profits per s. 58(2) or 61(2) — no audit needed if presumptive accepted. Sub-section (3) — Form 3CD (per CBDT Rules) furnished by specified date. Sub-section (4) — statutory-audit (Companies Act, 2013 / co-operative society Act / banking Act) sufficient if conducted before specified date and report filed timely. Sub-section (5)(a) — specified date is one MONTH before s. 263 return due date (typically 30-Sept where return-due 31-Oct). Sub-section (5)(b) — non-account-payee cheque / bank-draft = deemed cash for 5% test.

CASE LAW

ICAI Disciplinary Committee — tax-audit ceiling (60 audits per CA per year) statutorily anchored. CIT v. T.K.Mudaliar — turnover for s. 44AB excludes purely indirect taxes (GST). ITAT (various) — penalty u/s 1961 s. 271B (now s. 481 equivalent) on late audit waivable on showing reasonable cause.

PLANNING NOTES

(i) For business clients with turnover ₹ 1-10 cr, evaluate cash-test annually — meticulous segregation of cash-receipts / cash-payments needed to claim ₹ 10 cr threshold. (ii) For presumptive opt-out cases (declaring < 6%/8%), audit triggered AND books mandatory — net cost may exceed tax saving. Often better to remain in presumptive even if actual profit lower. (iii) Form 3CD — clause-wise certification (now ~44 clauses); maintain ICDS adjustments WP, GST-reconciliation WP, related-party WP. (iv) Specified-date diary tracking — late filing attracts s. 481 penalty (₹ 1.5 lakh or 0.5% of turnover, whichever lower).

CROSS-REFERENCES

Section 58 — Presumptive small business (audit relief).
Section 61 — NR presumptive (audit on lower-profit-claim).
Section 62 — Books of account (preceding obligation).
Section 263 — Return of income (anchor for specified date).
Form 3CA / 3CB / 3CD — Tax audit forms.
Section 481 — Penalty for failure to get audit.

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