The Tax Audit: Thresholds and Due Dates

Published 19 October 2026

A business can have a turnover of Rs 9 crore and need no tax audit. A trader with Rs 60 lakh of sales can need one. The difference lies in four things:

how much of the money moved in cash;
whether the person carries on a business or a profession;
whether a presumptive scheme was used; and
whether a lower profit was claimed.

Once an audit is required, the report has a fixed date of its own, a month before the return. For the year just ended, that date has been moved by a CBDT circular. From tax year 2026-27, the consequence of missing it changes from a penalty to a fixed fee. This guide covers who is audited, in which form, by when, and what happens on default.

Which Act governs which year

Financial year 2025-26 (assessment year 2026-27) and earlier. The audit is required by section 44AB of the Income-tax Act, 1961. The report is in Forms 3CA or 3CB with Form 3CD under rule 6G of the Income-tax Rules, 1962. Default is penalised under section 271B.
Tax year 2026-27 onwards. The counterpart is section 63 of the Income-tax Act, 2025. The report is in Form No. 26, Parts A to D, under rule 47 of the Income-tax Rules, 2026. Default attracts a fee under section 428©, as substituted by the Finance Act, 2026.
Under section 536(2)© and (d) of the 2025 Act, proceedings, including penalty, for any tax year beginning before 1 April 2026 continue under the 1961 Act.

The audits being completed in October 2026 are for AY 2026-27 and fall wholly under the 1961 Act.

Who must be audited: section 44AB

Section 44AB requires an audit by a person:

(a) Business turnover above Rs 1 crore. This covers a person carrying on business whose “total sales, turnover or gross receipts … in business exceed or exceeds one crore rupees”. The first proviso substitutes ten crore rupees where both of two cash tests are met:
- the “aggregate of all amounts received including amount received for sales, turnover or gross receipts during the previous year, in cash, does not exceed five per cent of the said amount”; and
- the “aggregate of all payments made including amount incurred for expenditure, in cash, during the previous year does not exceed five per cent of the said payment”.
Under the second proviso, a non-account-payee cheque or draft counts as cash.
(b) Professional receipts above Rs 50 lakh. This covers a person carrying on profession whose “gross receipts in profession exceed fifty lakh rupees”. There is no higher limit for low-cash professionals.
© Lower than presumptive income. This covers a business taxed under section 44AE, 44BB or 44BBB where the person “has claimed his income to be lower than the profits or gains so deemed”.
(d) A professional under section 44ADA declaring less. This applies where the person claims profits lower than the deemed figure and income exceeds the maximum amount not chargeable to tax.
(e) A business under the section 44AD(4) lock. This applies where section 44AD(4) applies and income exceeds the maximum amount not chargeable to tax.

Two exclusions follow. The first proviso after clause (e), substituted by the Finance Act, 2023 with effect from 1 April 2024, provides that the section “shall not apply to a person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD or sub-section (1) of section 44ADA”. The next proviso excludes income of the kind in sections 44B and 44BBA.

The cash test for the Rs 10 crore limit is stricter than the one in sections 44AD and 44ADA. It looks at both receipts and payments. A business that collects everything through the bank but pays suppliers or workers in cash beyond 5 per cent is held to Rs 1 crore.

Section 63 of the 2025 Act

Section 63(1) puts the conditions in a Table. Serial number 1 has the business test of one crore rupees, the ten-crore substitution where cash receipts and cash payments each do not exceed 5 per cent, and the professional test of fifty lakh rupees. Serial number 2 covers a person whose business or profession is “referred to in section 58(2) or 61(2) (Table: Sl. Nos. 4 and 5)” and who claims profits “lower than the deemed profits as referred to in the said sections”.

Section 63(2) provides that the 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)”. Section 63(5)(b) carries the cheque and draft rule.

Serial number 2 absorbs the 1961 Act’s clauses © and (d), but without clause (d)'s condition that income exceed the exemption limit. That condition appears instead in section 58(3), which requires books and audit where a lower profit is claimed under any of the three resident presumptive schemes. Clause (e), the lock case, is carried by section 58(8). Section 58(3) reaches a business under serial number 1 that declares less, even outside a lock. Under the 1961 Act, only section 44AB(a)'s turnover test would catch such a business. See Presumptive Taxation for Small Business.

Who audits, and audit under another law

The audit is by an “accountant”, which under clause (i) of the Explanation to section 44AB has the meaning in the Explanation below section 288(2), that is, a chartered accountant. Where accounts are audited under another law, such as the Companies Act, 2013, the third proviso to section 44AB treats it as sufficient compliance if that audit is done and reported by the specified date “and a further report by an accountant in the form prescribed under this section”. Section 63(4) of the 2025 Act is to the same effect.

The forms

Rule 6G and Forms 3CA, 3CB and 3CD (AY 2026-27 and earlier)

Rule 6G(1) prescribes Form No. 3CA where the person “is required by or under any other law to get his accounts audited”, and Form No. 3CB in other cases. Under rule 6G(2), the particulars are in Form No. 3CD.

Rule 6G(3) allows a revised report from the accountant, furnished “before the end of the relevant assessment year”. It is available only where a payment made after the original report “necessitates recalculation of disallowance under section 40 or section 43B”.

The e-filing portal’s Form 3CA-3CD user manual describes Form 3CD in two parts. Part A, clauses 1 to 8, holds the assessee’s basic details. Part B, clauses 9 to 44, holds the particulars.

Rule 47 and Form No. 26 (tax year 2026-27 onwards)

Rule 47(1) of the 2026 Rules puts the audit report in Part A of Form No. 26 for a person audited under another law, and in Part B for others. Under rule 47(2), the particulars “shall also be in Part C and D of Form No. 26”. Rule 47(3) keeps the revision route: a revised report before the end of the financial year following the tax year, where a later payment “necessitates recalculation of the disallowance under section 35 or section 37”.

Form No. 26 is not printed in the official PDF of the 2026 Rules, which has no appendix of forms. The first reports in it fall due in 2027, for tax year 2026-27.

Due dates

The audit report is due by the specified date. Clause (ii) of the Explanation to section 44AB defines it as “date one month prior to the due date for furnishing the return of income under sub-section (1) of section 139”. Section 63(5)(a) of the 2025 Act uses the same words with reference to section 263(1).

For AY 2026-27, Explanation 2 to section 139(1) was substituted by the Finance Act, 2026 with effect from 1 March 2026. It sets these due dates:

Person	Return due date	Audit report (specified date)
Transfer pricing cases (section 92E applies)	30 November	31 October
Company; person whose accounts must be audited; partner of such a firm (and spouse under section 5A)	31 October	30 September
Business or professional income, accounts not required to be audited; partner of such a firm	31 August	not applicable
Any other assessee	31 July	not applicable

For AY 2026-27 the second row has moved. CBDT Circular No. 07/2026, dated 28 September 2026, issued under section 119 of the 1961 Act read with section 536 of the 2025 Act, extends the return due date for persons in serial number 2 “from 31.10.2026 to 21.11.2026”. It adds that “consequently, the specified date for furnishing of report of audit for the Assessment Year 2026-27 … shall stand extended to 21.10.2026”. The circular does not change the transfer pricing or non-audit dates.

For tax year 2026-27 under the 2025 Act, section 263(1)©, as substituted by the Finance Act, 2026, sets the same structure: 31 October for audited persons and 30 November for transfer pricing cases, in the financial year after the tax year. The audit report for tax year 2026-27 is therefore due by 30 September 2027, unless extended.

The portal procedure

The e-filing portal’s Form 3CA-3CD user manual describes three stages. Form 3CB-3CD follows the same pattern.

The taxpayer assigns the form. After logging in, the taxpayer selects e-File > Income Tax Forms > File Income Tax Forms and chooses the form. On the form page the taxpayer selects the filing type and assessment year, assigns the chartered accountant (added earlier through Authorized Partners > My CA) and clicks Continue. A Transaction ID is issued.
The CA accepts and uploads. The CA opens Pending Actions > Worklist, clicks Accept under For your Action, and then File Form under Pending for Filing. The manual states that “the CA is required to fill the form through the Offline Utility only”. The JSON file it produces is uploaded with any attachments. The CA proceeds through the UDIN page and e-verifies with a digital signature certificate.
The taxpayer accepts. Under Worklist > Pending for Acceptance, the taxpayer clicks Accept, or rejects with reasons. The taxpayer then e-verifies, and the manual describes verification by digital signature certificate. An acknowledgement number is issued.

The manual’s prerequisites are:

valid e-filing accounts for both taxpayer and CA;
active PANs;
a valid and active DSC for both; and
for individuals, PAN linked with Aadhaar (described as recommended).

In the manual’s sequence, the success message with an acknowledgement number comes only after the taxpayer’s acceptance and e-verification.

What to have ready

Turnover or gross receipts for the year, and cash receipts and cash payments as percentages, from the books and bank statements. These decide whether the limit is Rs 1 crore or Rs 10 crore.
Whether accounts are audited under another law, from the constitution of the entity. This decides Form 3CA or 3CB.
Finalised accounts (balance sheet and profit and loss account) and the books behind them; see Books of Account.
Data the Form 3CD particulars call for, such as TDS compliance, payments covered by section 40A(3), section 43B payments and quantitative details, from the books, TRACES and the GST returns.
Portal readiness. The CA must be assigned, both DSCs registered and the PAN active.

Default: section 271B, and the new fee

Up to AY 2026-27: penalty under section 271B

Section 271B of the 1961 Act provides that if a person “fails to get his accounts audited … or furnish a report of such audit as required under section 44AB”, the Assessing Officer may direct payment of “a sum equal to one-half per cent of the total sales, turnover or gross receipts … or a sum of one hundred fifty thousand rupees, whichever is less”. The penalty is discretionary. Under section 273B, it is not imposable if the person “proves that there was reasonable cause for the said failure”.

Where no books were kept at all, the Gauhati High Court held in Surajmal Parsuram Todi v. CIT (6 August 1996, (1996) 222 ITR 691) that section 271B could not be applied. The assessee had admittedly kept no books for several years, and the Tribunal had upheld a section 271B penalty. The Court held that the failure to keep books under section 44AA “is complete” when committed, and “after that there can be no possibility of any offence as contemplated by Section 44AB”. It answered the question in the assessee’s favour, leaving the default to section 271A. The Pune Tribunal followed it in Ram Prakash C. Puri v. ACIT ((2001) 77 ITD 210, 18 April 2000), deleting a section 271B penalty on a civil contractor who kept no books and had been penalised under section 271A. The books penalty is explained in Books of Account.

As enacted, the 2025 Act carried section 271B forward as section 446, “Failure to get accounts audited”: the lesser of 0.5 per cent of turnover or receipts and Rs 1,50,000. The Finance Act, 2026, with effect from 1 April 2026, replaced section 446 with an unrelated provision on crypto-asset statements. It substituted a new section 428 headed “Fee for default in furnishing return of income, audited accounts and reports”. Clause © applies where a person “fails to get his accounts audited for any tax year or years and furnish the report of such audit as required under section 63”. The person “shall be liable to pay by way of fee”:

“a sum of ₹ 75000 for a delay up to one month for which such failure continues”; and
“a sum of ₹ 150000 thereafter”.

Three differences from section 271B follow from the text:

the amount is fixed, not a percentage of turnover;
it is a fee the person “shall be liable to pay”, not a penalty the Assessing Officer “may” impose; and
the reasonable cause defence in section 470 lists penalty sections (441, 442, 446 and others) and does not mention section 428.

What can and cannot be changed afterwards

A furnished report can be revised only on the narrow ground in rule 6G(3) or rule 47(3): a later payment that changes a disallowance under section 40 or 43B (section 35 or 37 under the 2025 Act). The return itself can be revised under section 139(5); see Belated and Revised Returns. A penalty order under section 271B can be appealed; see Appealing to the Commissioner (Appeals). A walkthrough of a return filed after an audit is in Filing ITR-3 after Opting Out of 44AD.

Summary

Fix the Act: section 44AB, rule 6G and section 271B for AY 2026-27 and earlier; section 63, rule 47 and section 428© from tax year 2026-27.
A business is audited above Rs 1 crore turnover, or above Rs 10 crore if cash receipts and cash payments are each within 5 per cent. A profession is audited above Rs 50 lakh.
Also audited: lower-than-presumptive claims under section 44AE, 44BB or 44BBB; section 44ADA claims below 50 per cent with income above the exemption limit; and a business in the section 44AD(4) lock with income above that limit. Under the 2025 Act, section 58(3) and (8) apply.
Not audited under the section: a person declaring under section 44AD(1) or 44ADA(1) (section 58(2) under the 2025 Act).
Use Form 3CA (audit under another law) or 3CB, with 3CD; from tax year 2026-27, Form No. 26 Parts A or B with C and D.
File by the specified date, one month before the return due date. For AY 2026-27 this is 21 October 2026 under Circular No. 07/2026, with the return by 21 November 2026.
Default costs the lesser of 0.5 per cent of turnover and Rs 1,50,000 under section 271B (subject to reasonable cause), and from tax year 2026-27 a fee of Rs 75,000 or Rs 1,50,000 under section 428©.

This completes the set on small business and professionals; the related ITR walkthroughs are listed on the income-tax guides page.

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