Tax Audit Under Section 63: Limits, Deadlines and the New Fee
- Who needs a tax audit
- How the presumptive schemes interact
- Deadlines for tax year 2026-27
- The consequence: from penalty to fee
- Worked examples
- Books of account
- Year labels
- Where this fits
For tax year 2026-27, a business must have its accounts audited under section 63 of the Income-tax Act, 2025 (earlier 44AB) if turnover exceeds ₹1 crore. The limit rises to ₹10 crore if cash receipts and cash payments are each no more than 5% of the totals. A profession needs an audit if gross receipts exceed ₹50 lakh. Anyone who opts for presumptive taxation but declares lower profits, with income above the basic exemption limit, also needs one. The audit report is due one month before the return due date, which is 30 September 2027 for most audited taxpayers. Missing it now attracts a fixed fee of ₹75,000, rising to ₹1,50,000 after a month, under section 428(c) as substituted by the Finance Act, 2026.
Who needs a tax audit
| Situation | Section 63(1) Table | Audit required if |
|---|---|---|
| Business, general case | Sl. No. 1(a) | Total sales, turnover or gross receipts exceed ₹1 crore |
| Business with minimal cash | Sl. No. 1(b) | Turnover exceeds ₹10 crore, where cash receipts are no more than 5% of all receipts and cash payments no more than 5% of all payments |
| Profession | Sl. No. 1(c) | Gross receipts exceed ₹50 lakh |
| Presumptive scheme, lower profit claimed | Sl. No. 2, with section 58(3) | Profit declared below the presumptive rate, and total income exceeds the maximum amount not chargeable to tax |
Two further rules:
- Presumptive income declared means no audit. Section 63(2) switches off the audit requirement where profits are declared under section 58(2).
- Cash includes bearer cheques. A cheque or draft that is not account payee counts as cash for the 5% tests (section 63(5)(b)).
How the presumptive schemes interact
Section 58(2) (earlier 44AD, 44ADA and 44AE) offers these schemes to eligible residents:
| Scheme | Turnover or receipts limit | Deemed profit |
|---|---|---|
| Business (Sl. No. 1), for resident individuals, HUFs and firms other than LLPs | ₹2 crore; ₹3 crore if cash receipts are no more than 5% | 6% of receipts through banking or online channels, 8% of the rest, or actual profit if higher |
| Goods carriages (Sl. No. 2), for owners of up to ten vehicles | No turnover limit | ₹1,000 per ton a month for heavy vehicles; ₹7,500 a month for others |
| Specified profession (Sl. No. 3), for resident individuals and firms other than LLPs | ₹50 lakh; ₹75 lakh if cash receipts are no more than 5% | 50% of gross receipts, or actual profit if higher |
The five-year trap. Under section 58(7), a business that declares presumptive profit and then, in any of the next five years, declares profit below the presumptive rate loses the scheme for the following five years. Section 58(8) then requires books and an audit in those years whenever income exceeds the basic exemption limit.
Deadlines for tax year 2026-27
| Taxpayer | Audit report due (“specified date”, section 63(5)(a)) | Return due (section 263(1)) |
|---|---|---|
| Audited business or profession, company, partner of an audited firm | 30 September 2027 | 31 October 2027 |
| Taxpayer who also needs a transfer pricing report under section 172 | 30 October 2027 | 30 November 2027 |
| Business or profession not needing audit | Not applicable | 31 August 2027 |
The separate 31 August date for non-audited businesses and professionals is part of the due-date table substituted by section 66 of the Finance Act, 2026; see revised and updated returns for the full due-date table.
The consequence: from penalty to fee
In the Income-tax Act, 2025 as passed, section 446 let the Assessing Officer impose a penalty for failing to get accounts audited. The penalty was the lesser of 0.5% of turnover or gross receipts, and ₹1,50,000.
The Finance Act, 2026 replaced that section with a provision on crypto-asset reporting. It moved the consequence into section 428(c) as a fee:
| Delay in getting accounts audited and furnishing the report | Fee under section 428(c) |
|---|---|
| Up to one month | ₹75,000 |
| More than one month | ₹1,50,000 |
Section 428(d) applies a similar fee to the section 172 report on international and specified domestic transactions: ₹50,000 for a delay of up to one month, then ₹1,00,000.
Unlike the old penalty, the fee is not linked to turnover. A small business with ₹1.2 crore of turnover would have faced at most ₹60,000 under the 0.5% formula. Under section 428(c) a delay of even a few days costs ₹75,000.
Worked examples
- A consultant with ₹62 lakh of receipts, all by bank transfer. Receipts exceed ₹50 lakh, so section 63 would require an audit. But they are within the ₹75 lakh presumptive limit, because cash is no more than 5%. If she declares at least 50%, ₹31 lakh, as profit under section 58(2), section 63(2) removes the audit requirement. Declare less, with income above the basic exemption limit, and an audit is needed.
- An online retailer with ₹6 crore of turnover. Almost all receipts come through a payment gateway and all payments are by bank transfer. Cash receipts and payments are each under 5%, so the audit limit is ₹10 crore and no audit is required. The presumptive scheme is not available either, as turnover exceeds ₹3 crore, so the business keeps books under section 62 and computes actual profit.
- A trader with ₹1.4 crore of turnover and 12% cash sales. The cash test fails, so the ₹1 crore limit applies and an audit is required by 30 September 2027. If the report is filed on 20 October 2027, the delay is under a month and the fee is ₹75,000. If it is filed in December, the fee is ₹1,50,000.
Illustrative figures.
Books of account
Section 62 requires books for:
- specified professions, which include legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, information technology and company secretary work;
- other businesses and professions whose income exceeds ₹2,50,000 or turnover exceeds ₹25 lakh (for individuals and HUFs) in any of the three preceding years.
The audit is conducted by an “accountant” as defined in the Act, and the report is furnished in the prescribed form.
Year labels
This page covers accounts for tax year 2026-27 onwards under the Income-tax Act, 2025. Audits of FY 2025-26 accounts, due in 2026, fall under section 44AB of the Income-tax Act, 1961, with the penalty under its section 271B.
Where this fits
- Presumptive schemes in practice: when presumptive taxation saves money
- Advance tax for businesses: advance tax for tax year 2026-27
- Accounting depreciation versus tax: book vs tax depreciation
- Estimate the tax: income tax calculator
Sources. Income-tax Act, 2025, sections 58, 62, 63, 172, 263 and 446 (as enacted), Gazette of India, 21 August 2025. Finance Act, 2026, sections 40, 66, 96 and 101, Gazette of India, 30 March 2026.