A tax audit is an examination of a taxpayer's books by a chartered accountant, reported to the income tax department. The Income-tax Act, 2025 came into force on 1 April 2026 and moved the tax audit provision from Section 44AB to Section 63. The thresholds are broadly the same, so most businesses will find the test familiar.
Which law applies to which year
Income earned up to 31 March 2026 (financial year 2025-26) is still governed by the Income-tax Act, 1961, so audits for that year are under Section 44AB. Income from 1 April 2026 (tax year 2026-27 onwards) falls under the new Act and Section 63, with a consolidated audit report form.
Businesses
A tax audit is required when a business's turnover exceeds ₹1 crore. The limit rises to ₹10 crore if cash receipts and cash payments are each no more than 5% of the total, which covers many businesses paid mainly through banking channels.
Professionals
Professionals such as doctors, architects, consultants and lawyers need a tax audit when gross receipts exceed ₹50 lakh in the year.
Presumptive taxation cases
An audit can also be required when a taxpayer eligible for presumptive taxation declares profit below the deemed rate and total income exceeds the basic exemption limit. The new Act consolidates the presumptive schemes into one section and changes some conditions, so these cases should be reviewed individually.
Due date and penalty
The audit report is due before the return due date for audited taxpayers. Failing to get the accounts audited attracts a penalty linked to turnover, so it is worth confirming early in the year whether you cross the limits.
Because the audit draws on finalised books, closing the accounts early makes the deadline much easier to meet.
This article is general information based on the law as it stood on the date of publication. It is not advice for any specific situation.