🔔 URGENT REMINDER
Tax Audit Report: 30th September 2026
ITR for Audit Cases: 31st October 2026
File on time to avoid a penalty.
Which Tax Law Applies to Tax Audit for AY 2026-27?
This distinction matters in 2026.
AY 2026-27 relates to income earned during FY 2025-26, from 1 April 2025 to 31 March 2026. The Income-tax Act, 1961 governed that financial year.
Although the Income Tax Act, 2025 came into force from 1 April 2026, it governs income of Tax Year 2026-27 onwards. It does not retrospectively change the tax audit forms for FY 2025-26.
Therefore, for the tax audit currently being completed for AY 2026-27:
- Section 44AB of the Income-tax Act, 1961 continues to determine tax audit applicability;
- Form 3CA continues to apply where accounts are audited under another law;
- Form 3CB continues to apply where accounts are not required to be audited under another law; and
- Form 3CD continues to contain the prescribed statement of particulars.
The new Form 26 introduced under the Income Tax Rules, 2026 is relevant to tax audits for Tax Year 2026-27 that will be furnished in 2027. It should not be used in place of Form 3CA, 3CB or 3CD for AY 2026-27.
What Is a Tax Audit Under Section 44AB?
A tax audit is an examination of the books of account and prescribed tax particulars of a business or professional carried out by a Chartered Accountant where the conditions of Section 44AB are satisfied.
Its purpose is not merely to confirm that a balance sheet adds up. A tax audit helps ensure that important information relevant to income-tax computation and compliance is correctly disclosed to the Income Tax Department.
The audit process may involve reviewing:
- sales, turnover or professional receipts;
- books of account maintained by the taxpayer;
- method of accounting;
- business expenditure and inadmissible expenses;
- depreciation;
- statutory payments;
- TDS and TCS compliance;
- loans and deposits;
- related-party transactions;
- GST-related expenditure disclosures;
- payments to MSMEs where relevant;
- specified deductions and allowances; and
- other particulars prescribed in Form 3CD.
The tax audit report is electronically furnished through the Income Tax e-Filing portal by the Chartered Accountant assigned by the taxpayer.
Tax Audit Applicability for Businesses for AY 2026-27
Under Section 44AB, a person carrying on business is generally required to get the accounts audited if the total sales, turnover or gross receipts exceed ₹1 crore during FY 2025-26.
However, the law provides a substantially higher threshold for businesses where transactions are predominantly non-cash.
₹10 Crore Tax Audit Limit for Eligible Businesses
The business tax audit threshold can increase from ₹1 crore to ₹10 crore where both of the following conditions are satisfied:
- cash receipts do not exceed 5% of total receipts; and
- cash payments do not exceed 5% of total payments.
| Business Situation | Tax Audit Threshold |
|---|---|
| Normal business case | Turnover/gross receipts exceeding ₹1 crore |
|
Turnover/gross receipts exceeding ₹10 crore |
This distinction can completely change whether a business falls within Section 44AB.
For example, a business with ₹6 crore turnover is not automatically subject to tax audit solely because turnover exceeds ₹1 crore. If it satisfies both prescribed cash conditions, the ₹10 crore threshold may apply.
On the other hand, if the relevant cash percentage exceeds the prescribed limit, the normal ₹1 crore threshold may become relevant.
Tax Audit Applicability for Professionals
For a person carrying on a profession, the general tax audit threshold is different.
A professional is generally required to obtain a tax audit where gross receipts from the profession exceed ₹50 lakh during the relevant financial year.
| Category | General Tax Audit Threshold |
|---|---|
| Business | Above ₹1 crore, subject to the ₹10 crore relaxation where prescribed cash conditions are satisfied |
| Profession | Gross receipts above ₹50 lakh |
Professionals may include persons carrying on specified professions such as legal, medical, engineering, architectural, accountancy, technical consultancy and other professions covered by the Income-tax Act.