A tax audit is an audit of a taxpayer's books of account by a Chartered Accountant, reported in a prescribed format so the income tax department can verify the income declared. It is required under section 44AB of the Income-tax Act, 1961 for businesses and professionals above certain limits, and for some taxpayers using presumptive taxation.

Who needs a tax audit

Businesses

  • Turnover, sales or gross receipts above ₹1 crore in the financial year.
  • The limit rises to ₹10 crore if cash receipts are no more than 5% of total receipts and cash payments are no more than 5% of total payments.

Professionals (doctors, lawyers, architects, consultants and others)

  • Gross receipts above ₹50 lakh.
  • The limit rises to ₹75 lakh if cash receipts are no more than 5% of total receipts.

Presumptive taxation cases

  • A business eligible for section 44AD that declares profit lower than the presumptive rate (8% of turnover, or 6% for digital receipts) and whose total income exceeds the basic exemption limit.
  • A business that opts out of section 44AD within five years of opting in, where its income exceeds the basic exemption limit, for the following five years.
  • Professionals under section 44ADA who declare profit lower than 50% of gross receipts and whose income exceeds the basic exemption limit.

Which forms are filed

  • Form 3CA — when the taxpayer's accounts are already audited under another law, such as a company under the Companies Act.
  • Form 3CB — when the accounts are not required to be audited under any other law, such as a proprietor or a partnership firm.
  • Form 3CD — the detailed statement of particulars, filed with either 3CA or 3CB. It covers matters such as the method of accounting, TDS compliance, payments to related parties, cash transactions, loans and deposits, and disallowances.

The tax audit report is uploaded by the Chartered Accountant on the e-filing portal and accepted by the taxpayer.

Due dates

  • The tax audit report must be filed one month before the due date of the income tax return — generally by 30 September, as the return is due by 31 October.
  • For taxpayers who also need a transfer pricing report in Form 3CEB, the return is due by 30 November, and the tax audit report by 31 October.

The government sometimes extends these dates, so check the current notification.

Penalty for not getting an audit

Failure to get the accounts audited or to furnish the report in time can attract a penalty under section 271B of 0.5% of turnover or gross receipts, up to a maximum of ₹1.5 lakh, unless there is a reasonable cause. A return filed without a required audit report can also be treated as defective.

Preparing for a smooth tax audit

  1. Close and reconcile the books early — bank, GST, TDS and ledger balances.
  2. Keep records of cash transactions above the limits in sections 40A(3), 269SS and 269T.
  3. Check TDS compliance on all payments; non-deduction leads to disallowances reported in Form 3CD.
  4. Reconcile turnover in the books with GST returns.
  5. Keep details of related-party payments, loans and deposits ready.

Frequently asked questions

What is the turnover limit for a tax audit?

₹1 crore for businesses, or ₹10 crore if cash receipts and payments are each within 5%. For professionals, ₹50 lakh, or ₹75 lakh if cash receipts are within 5%.

What is the due date for filing the tax audit report?

Generally 30 September, one month before the return due date. For taxpayers who also file Form 3CEB, it is 31 October.

What is the penalty for not getting a tax audit done?

0.5% of turnover or gross receipts, up to ₹1.5 lakh, under section 271B, unless there is a reasonable cause.

Is a tax audit required if I declare lower profit under section 44AD?

Yes, if you declare profit below the presumptive rate of 8% (6% for digital receipts) and your total income exceeds the basic exemption limit.

How we help

ASKN & Co. LLP conducts tax audits and statutory audits for businesses, firms, LLPs and companies in Hyderabad. See our statutory and tax audit service.

This article is based on the Income-tax Act, 1961, which applies up to tax year 2025-26. The Income-tax Act, 2025 contains corresponding provisions from tax year 2026-27.

This article is general information based on the law as at the date shown and is not professional advice. Please consult us before acting on it.