Section 44AB Income Tax Audit: Due Date, Criteria, Audit Report, Penalty

As per the provisions of the Income Tax Act,1961, if the business or profession turnover exceeds prescribed threshold limit, the assessee is required to get the books of accounts audited before filing a tax return. The due date to file ITR for taxpayers requiring tax audit under Section 44AB is 31st October 2026 for FY 2025-26 (AY 2026-27).

Budget 2026 Update

Amount payable on default of submitting the tax audit report has been converted from penalty to fees. This is intended to reduce litigations.

What is a Tax Audit?

Tax audit is an examination or review of books of accounts of any business or profession carried out by taxpayers from an income tax viewpoint.

Section 44AB of the income tax act mandate tax audit for businesses have turnover more than Rs. 1 Crore or Rs. 10 Crore (where more than 95% of receipts are digital). For professional, tax audit is mandatory if the gross receipts exceed Rs. 50 lakh in any previous year. 

Tax Audit Due Date

The last date for completion of the tax audit for income tax purposes is 30th September 2026 for the FY 2025-26 (AY 2026-27). In the case of assessees covered by the provisions of transfer pricing audit, the last date for completion of tax audit is 31st October 2026. 

What are the Objectives of Tax Audit?

Tax audit is conducted to achieve the following objectives:

• Ensure proper maintenance and correctness of books of accounts and certification of the same by a Chartered Accountant (tax auditor).
• Reporting observations/discrepancies noted by the tax auditor after a methodical examination of the books of account
• To report prescribed information such as tax depreciation, compliance with various provisions of income tax law, etc.
• Computation of tax and deductions becomes easy with auditing.
• The major role is to verify the information filed in the income tax return regarding income, tax, and deductions by the taxpayer.

These enable tax authorities to verify the correctness of income tax returns filed by the taxpayer. Calculating and verifying total income, claims for deductions, etc., also becomes easier.

What is the Turnover Limit for Income Tax Audit?

A taxpayer is required to have a tax audit carried out if the turnover or gross receipts of business exceed Rs 1 crore in a financial year or Rs 10 crore in case cash transactions do not exceed 5% of the total transactions (i.e., Cash receipts/payments does not exceed 5% of the total receipts/total payments). For professionals, a tax audit is mandatory if gross receipts exceed Rs 50 lakhs in the financial year. However, a taxpayer may be required to get their accounts audited in certain other circumstances also. We have categorized the various circumstances in the tables mentioned below:

Under section 44AB of the Income Tax Act, 1961, the following are the categories of taxpayers who are mandatorily required to conduct tax audit of their books of accounts:

In such cases, the taxpayer need not get his accounts audited again for income tax purposes. It is sufficient if accounts are audited under such other law before the due date of filing the return. The taxpayer can furnish this prescribed audit report under Income tax law.

What Constitutes an Audit Report?

The tax auditor shall furnish his report in a prescribed form which could be either Form 3CA or Form 3CB where:

• Form No. 3CA is furnished when a person carrying on business or profession is already mandated to get his accounts audited under any other law.
• Form No. 3CB is furnished when a person carrying on business or profession is not required to get his accounts audited under any other law.
• Form No. 3CE is furnished when Non-residents and foreign companies receive royalties or fees for technical services from the government or an Indian concern. 

In the case of either of the aforementioned audit reports, the tax auditor must furnish the prescribed particulars in Form No. 3CD, which forms part of the audit report.

How and When Tax Audit Reports Should be Furnished?

The tax auditor shall furnish a tax audit report online by using his login details in the capacity of ‘Chartered Accountant’. Taxpayers shall also add CA details in their login portal.

Once the tax auditor uploads the audit report, the same should either be accepted/rejected by the taxpayer in their login portal. If rejected for any reason, all the procedures need to be followed again till the audit report is accepted by the taxpayer.

The last date for filing of income tax audit report is 31st October of the next financial year in case the taxpayer has entered into an international transaction and 30th September (31st October for FY 2025-26) of the subsequent year for other taxpayers.

What is the Penalty of Non-filing or Delay in Filing Tax Audit Report?

If any taxpayer is required to get the tax audit done but fails to do so, the least of the following may be levied as a fee:

• 0.5% of the total sales, turnover, or gross receipts, or
• Rs 1,50,000

However, if there is a reasonable cause of such failure, no fees shall be levied under section 271B. As proposed in Budget 2026 this will now be treated as a fee and not penalty. 

So far, the reasonable causes that are accepted by Tribunals/Courts for delay in filing tax audit reports are: 

• Natural Calamities
• Resignation of the Tax Auditor and Consequent Delay
• Resignation of Accountant/key employees.
• Labour problems such as strikes, lock-outs for an extended period
• Loss of Accounts because of situations beyond the control of the Assesses
• Physical inability or death of the partner in charge of the accounts

Conclusion

As per the Income Tax Act 1961, tax audit is mandatory for businesses/professions exceeding a certain turnover limit to ensure compliance with the law. An understanding of the provisions can be helpful to avoid penalties, disallowances, and legal action. By staying updated, business owners and professionals can minimize their tax outgo and avoid complications.

Related Articles

Form 3CD- Explanation and Applicability

Comprehensive Analysis of Tax Audit – Forms 3CA, 3CB, 3CD & 3CE  

Books of Accounts and Audit Requirements 

ITR Filing Last Date FY 2024-25 (AY 2025-26)