Provisions Related To ‘Tax Audit’ Under Income Tax Act, 2025 with FAQs

Section 63 of the Income Tax Act, 2025, corresponding to Section 44AB of the earlier law, lays down provisions relating to tax audit and submission of audit reports. The section specifies categories of persons required to get their accounts audited, including businesses exceeding ₹10 crore turnover where cash transactions do not exceed 5 percent, businesses exceeding ₹1 crore in other cases, and professionals with receipts above ₹50 lakh. It also applies where income is declared lower than presumptive taxation provisions. Where income is declared in accordance with presumptive provisions, audit is not required. Assessees liable for audit must furnish a report, duly signed by a chartered accountant, by the specified date, which is defined as one month prior to the due date for filing the return. The prescribed forms include different parts of Form 26 depending on whether audit is conducted under another law or solely under this section. The law also clarifies that audit under another statute, such as the Companies Act, is considered sufficient compliance if accompanied by the prescribed report. Payments through non-account payee cheques are treated as cash for determining thresholds. Failure to comply may result in a penalty of up to 5 percent of turnover or ₹1,50,000, whichever is lower, subject to reasonable cause. Non-furnishing of audit details may also render the return defective. The provision permits revision of audit reports in specified situations and restricts certain persons, including directors and related parties, from conducting audits.

FAQs on Tax Audit under Income Tax Act, 2025

(1) Who is liable to get his Accounts Audited under New Income Tax Act, 2025?

Sec 63 requires the following persons liable to get his Audited:

(2) If profits and gains of business or profession, declared by the assessee are as per section 58(2) or 61(2), then whether Audit under this section is required?

If profits and gains of business or profession, declared by the assessee are as per section 58(2) or 61(2), then Audit under this section is not required.

(3) Is there any requirement to file Audit Reports by the Assessees, who are liable to get the Accounts Audited?

Yes, the assessee shall furnish, by the specified date, the report of such audit in such form, duly signed and verified by the accountant and setting forth such particulars, as may be prescribed.

(4) A Company incorporated in India is required to get its accounts audited under the Companies Act, 2013. Is it required to get the Accounts against the Income Tax Act under Sec 63?

No, where a person is required, by or under any other law, to get his accounts audited, then it shall be sufficient compliance of this section –

(a) if such person gets the accounts of such business or profession audited under such law before the specified date; and

(b) furnishes by that specified date the report of such audit along with the report of the accountant in the form as may be prescribed.

(5) What is the Form prescribed for submitting the Audit Report under this Section?

It is prescribed under Rule 47 as under:

(6) What is Specified Date to furnish the Audit Report under this Section?

“Specified Date” means the date one month prior to the due date for furnishing the return of income under section 263(1).

Due date for furnishing the Return u/s. 263(1) and the due date for furnishing the Tax Audit Report is furnished below:

(7) If a person carrying a Business with total sales, turnover or gross receipts, in business is Rs.2 crores in a tax year and all the receipts are by a cheque, which is not account payee. Whether such person is required to get his accounts audited under this Section?

Yes, even though the person receive all the receipts by cheque, it will be deemed to be cash receipt as the cheque drawn is not an account payee.

As per Sec 63 (5), the payment or receipt, as the case may be, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the payment or receipt, as the case may be, in cash.

(8) What are the consequences, if a person fails to get his accounts audited for any tax year or years or fails to furnish the audit report as required under this Section?

A. As per Section 446, if any person fails to get his accounts audited for any tax year or years or furnish the audit report as required under this section, the Assessing Officer may impose a penalty on such person, which shall be the lesser of—

(a) 5% of the total sales, turnover, or gross receipts in business, or the gross receipts in profession for such tax year or years; or

(b) 1,50,000.

However, no penalty shall be imposed on a person or assessee for any failure, if he proves that there was reasonable cause for the said failure. [Sec 470].

B. The Return of Income contains certain particulars related to Audit Report (like Acknowledgement number and date of filing of Audit Report) to be filled-up by the Assessee, if Audit under this section is applicable. If this is not filled-up, then the Assessing Officer, under Section 263 (7), may treat the Return as ‘defective’. If such defect is not rectified, then the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return.

(9) The Audit Report filed under this section contains certain expenses not paid by the Assessee as on the date of signing the Audit Report (say for example Bonus, which is allowed on actual payment basis under section 37). Subsequently, the Assessee paid the Bonus, after filing the Audit Report but before filing the Return of Income under Section 263. Can the Audit Report filed under Sec 63 be revised to report this payment?

Yes, the report of audit furnished under rule 47 may be revised by the person by obtaining a revised report of audit and shall furnish it before the end of the relevant financial year succeeding the tax year for which the report pertains, if there is payment by such person after furnishing of the report, which necessitates recalculation of the disallowance under section 35 or section 37.

(10) Who is eligible to carry out the Audit under this Section?

A chartered accountant as defined in section 2(1)(b) of the Chartered Accountants Act, 1949, who holds a valid Certificate of Practice under section 6(1) of that Act is eligible to carry out the Audit under this Section.

The Report of Audit or Revised Report of Audit should be obtained from such Chartered Accountant who carried out the Audit.

(11) A Director of a Company is a Chartered Accountant, holding a valid certificate of practice. Can he conduct the Audit and issue Audit Report under this Section?

No, under section 515(3)(b), in case of an assessee, being a company, a person who is not eligible for appointment as an auditor of the said company under section 141(3) of the Companies Act, 2013 cannot conduct the Audit and issue Audit Report for the said Company under Sec 63.

Since the Director of the Company cannot be appointed as an auditor under Sec 141 (3), he cannot conduct the Audit and issue Audit Report for the said Company under Sec 63.

Section 515(3)(b) excludes the following persons from conducting the audit under this section-

(A) the assessee himself, or in the case of being a firm or association of persons or a Hindu undivided family, any partner of such firm or a member of such association or such Hindu undivided family;

(B) for an assessee, being a registered non-profit organisation, any person referred to in section 355(h)(i) or (ii) or (iii) or (iv);

(C) for any person other than the persons referred to in sub-clauses (A) and (B), the person who is competent to verify the return under section 263 as per section 265;

(D) any relative of any of the persons referred to in sub-clauses (A), (B) and (C);

(E) an officer or employee of the assessee;

(F) an individual, who, is a partner, or who is in the employment, of an officer or employee of the assessee;

(G) an individual, who or his relative or partner-

(I) is holding any security of, or interest in, the assessee and the face value of such security or interest held by his relative does not exceed ₹ 1,00,000;

(II) is indebted to the assessee, and such debt in case of his relative does not exceed ₹ 1,00,000;

(III) has given a guarantee or provided security in connection with the indebtedness of a third person to the assessee and such relative gives a guarantee or provides security for an amount not exceeding ₹ 1,00,000;

(H) a person who, whether directly or indirectly, has business relationship with the assessee of such nature, as may be prescribed;

(I) a person convicted by a court of an offence involving fraud and ten years has not elapsed from the date of such conviction.

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