Direct Tax Laws & International Taxation · Tax Audit and Ethical Compliances

Tax Audit Applicability and Due Dates (Section 63, Income-tax Act, 2025)

Updated 5 October 2026

Tax audit is a mandatory audit of accounts under section 63 of the Income-tax Act, 2025. Check the business or profession limit first: ₹1 crore turnover (₹10 crore if cash receipts and payments are each within 5%) or ₹50 lakh for professionals. Then check presumptive-scheme cases. File the report one month before the return due date.

Understand Tax Audit Applicability and Due Dates

A tax audit is an audit of the books of a person carrying on business or profession, done by a chartered accountant. The CA gives a report in the prescribed form. The Assessing Officer uses it to verify the claims in the return. It is not the same as a statutory audit under the Companies Act, although one audit can serve both purposes.

Applicability depends on three things: who you are (business or profession), how large your receipts are in the tax year, and whether you used a presumptive scheme and declared profit below the deemed rate. You test each in turn. Meeting any one trigger is enough to need an audit.

For a business, the basic limit is total sales, turnover or gross receipts above ₹1 crore. This rises to ₹10 crore if two cash conditions are met. The tests are applied to aggregate amounts. Aggregate cash receipts, including those on capital account, must not exceed 5% of aggregate receipts. Aggregate cash payments, including those on capital account, must not exceed 5% of aggregate payments. Each is compared with 5% separately. If either test fails, the ₹1 crore limit applies. The higher limit does not apply to professions. A professional is audited if gross receipts exceed ₹50 lakh.

There are three presumptive schemes. Each applies only to eligible assessees. Each lets an eligible assessee declare profit at a deemed rate without full books:

Small-business scheme: it is open only to eligible assessees with turnover up to ₹2 crore, or up to ₹3 crore if cash receipts are no more than 5% of total receipts (at least 95% received digitally). Deemed profit is 8% of turnover, or 6% of the turnover received by digital means. If you declare profit below the deemed rate and your total income exceeds the maximum amount not chargeable to tax, audit applies. This scheme has a 5-year lock-out. If you opt out, you cannot opt back in for the next five tax years. In those years, if your total income exceeds the exemption limit, audit applies.
Professionals' scheme: the deemed profit rate is 50% of gross receipts. It is open only to eligible specified professionals with receipts up to ₹50 lakh, or up to ₹75 lakh if the digital-receipts condition is met. If you declare profit below 50% and your total income exceeds the maximum amount not chargeable to tax, audit applies. Check the Act's provision on opting out of this scheme for any lock-out before you apply one.
Goods carriage scheme: it is open only to eligible assessees. If you claim profit below the deemed amount for the vehicles and your total income exceeds the maximum amount not chargeable to tax, audit applies. Check the Act's provision on opting out of this scheme for any lock-out before you apply one.

Lock-out rules are scheme-specific. Read the Act's provision for the scheme in the question. Do not carry the small-business scheme's five-year period over to another scheme without checking.

Timing is simple. The audit report must be furnished one month before the due date for filing the return. Late or missed audit attracts a penalty. Where accounts are already audited under another law, you need not get a separate full tax audit. You furnish the report of that audit, together with the particulars required in the prescribed form.

Key rules to remember

Business limit (basic): Audit if total sales, turnover or gross receipts > ₹1,00,00,000; Applies to every person carrying on business, whether profit or loss.
Business limit (enhanced): Limit becomes ₹10,00,00,000 if aggregate cash receipts ≤ 5% of aggregate receipts AND aggregate cash payments ≤ 5% of aggregate payments; Both tests must be met. Include capital-account receipts and payments in the tests. If either fails, the ₹1 crore limit applies.
Cash test percentage: Cash % = Aggregate cash receipts (or payments) ÷ Aggregate receipts (or payments) × 100; Compute receipts and payments separately. Compare each with 5%.
Profession limit: Audit if gross receipts > ₹50,00,000; No enhanced ₹10 crore-type limit for professions under this rule. This is separate from the professionals' presumptive scheme, whose eligibility limit is ₹50 lakh, or ₹75 lakh with the digital-receipts condition.
Presumptive trigger: Eligible assessee declares profit < deemed profit under the scheme AND total income > maximum amount not chargeable to tax → audit; Applies only to eligible assessees, scheme by scheme. Small-business scheme: deemed profit 8% of turnover (6% for digital receipts); eligibility limit ₹2 crore, or ₹3 crore if cash receipts are no more than 5% (at least 95% digital); opting out bars re-entry for five tax years. Professionals' scheme: deemed rate 50%. Goods carriage scheme: deemed amount per vehicle. For any lock-out in the professionals' or goods carriage scheme, read that scheme's provision in the Act.
Report due date: Audit report due on or before the specified date = Return due date − 1 month (as provided in the section); The report must be furnished on or before the date the section specifies, which is one month before the return due date. For audit cases the return due date is generally 31 October, so the report is generally due by 30 September. The return due date is 30 November for assessees who must obtain a transfer pricing report (international or specified domestic transactions). For them, the tax audit report is due one month earlier, on 31 October. The exact categories of assessee and dates are in the section, so confirm them against the tax year's study material.
Penalty for default (1961 Act position): Under section 271B of the 1961 Act: lower of 0.5% of turnover or gross receipts, and ₹1,50,000; This is the 1961 Act position, for failing to get accounts audited or to furnish the report. Under that Act there is no penalty if you show reasonable cause for the failure. Confirm the equivalent provision and the amount in the Income-tax Act, 2025 from the Act or the ICAI study material before quoting it in an answer.

How to solve Tax Audit Applicability and Due Dates questions

Use the same sequence for every applicability question. It stops you missing a hidden trigger.

1Identify the assessee's activity: business, profession, or both. Treat each separately for limits, but note that the question may ask about the person overall.
2Find the correct base: total sales, turnover or gross receipts of the tax year. Exclude items that are not turnover, such as sale of a capital asset or loans.
3Compute the cash receipts % and the cash payments %, each on aggregate amounts against its own total. Include capital-account items in the cash tests.
4Choose the limit. If both cash tests are 5% or less, use ₹10 crore for business. Otherwise use ₹1 crore. For professions use ₹50 lakh.
5Check presumptive-scheme cases scheme by scheme, and only for eligible assessees. If profit is declared below the deemed rate and total income exceeds the maximum amount not chargeable to tax, audit applies even below the limits. Apply a lock-out only as the Act provides for that scheme. The 5-year lock-out applies if the assessee opted out of the small-business scheme.
6State the conclusion clearly: audit applies or does not apply, with the trigger named.
7If asked about timing, fix the return due date for the assessee (generally 31 October for audit cases, and 30 November if a transfer pricing report is required; check the section for the exact categories) and subtract one month. State the penalty for default if the question asks about consequences.

Quickest way: Three-check shortcut for applicability

When to use it: Use this for MCQs and for the opening lines of a written answer when time is short.

Check 1: business turnover above ₹1 crore, or professional receipts above ₹50 lakh? If no, move to check 3.
Check 2: if business turnover is between ₹1 crore and ₹10 crore, compute both cash percentages. Audit is not needed only if both are 5% or less. Above ₹10 crore, audit is needed regardless.
Check 3: is there a presumptive claim of profit below the deemed rate with income above the exemption limit? If yes, audit. Apply a lock-out only as the Act provides for that scheme.
Date: return due date minus one month. For the common 31 October return date, the report date is 30 September.

Common mistakes in Tax Audit Applicability and Due Dates

Applying the ₹10 crore limit when only one cash test is met.
Students remember '5% cash' as one condition and test only receipts.
Fix: Write two lines in your working: cash receipts % and cash payments %. The enhanced limit needs both at 5% or less.
Using the ₹10 crore limit for a professional.
Students generalise the business rule to every assessee.
Fix: Remember that the enhanced limit is for business only. A professional is audited above ₹50 lakh of gross receipts.
Skipping audit because the business has a loss or small profit.
Students link audit to income rather than receipts.
Fix: Audit under the turnover test depends on turnover or gross receipts, not profit. A loss-making business above the limit still needs an audit.
Missing the presumptive-scheme trigger, or applying the 5-year lock-out to every scheme without checking.
Students stop once turnover is below the limit, or treat all presumptive schemes alike.
Fix: Always run the presumptive check last. Lower-than-deemed profit with income above the exemption limit requires audit even for small turnovers. Name the scheme, and apply a lock-out only as the Act provides for that scheme.
Treating sale of a fixed asset or loan receipts as turnover.
Students add every receipt shown in the question.
Fix: Include only sales, turnover or gross receipts of the business. Remember that capital-account items matter for the cash percentage tests but not for turnover.
Stating the audit report date as the return due date, or moving the report date on its own for transfer pricing cases.
Students mix up the dates, or think the transfer pricing report changes the audit report date directly.
Fix: The report is due one month before the return due date. Write the return date first, then subtract one month. The transfer pricing report moves the return date to 30 November, and the audit report date follows as 31 October.

Worked examples

Example 1

Sharma Traders, a proprietary concern, had turnover of ₹8.5 crore in the tax year. Total receipts including a capital receipt of ₹30 lakh from sale of old machinery were ₹8.8 crore, of which ₹40 lakh was received in cash. Total payments, including capital payments, were ₹7.5 crore, of which ₹36 lakh was paid in cash. The cash tests are applied to aggregate receipts and aggregate payments, each compared with 5%. (a) Is tax audit required? (b) What if cash payments were ₹40 lakh instead?

Show the solution

Activity is business, so the base limit is ₹1 crore and the enhanced limit is ₹10 crore if both cash tests pass.
Cash receipts test, on aggregate receipts of ₹8.8 crore including the capital receipt: 40,00,000 ÷ 8,80,00,000 × 100 = 4.55%, which is 5% or less.
Cash payments test (a), on aggregate payments of ₹7.5 crore including capital payments: 36,00,000 ÷ 7,50,00,000 × 100 = 4.8%, which is 5% or less.
Both tests are met, so the limit is ₹10 crore. Turnover of ₹8.5 crore does not exceed it.
Check presumptive: nothing in the facts shows a presumptive claim, so no trigger.
Part (b): 40,00,000 ÷ 7,50,00,000 × 100 = 5.33%, which is more than 5%. The enhanced limit is lost and the ₹1 crore limit applies.
Turnover of ₹8.5 crore exceeds ₹1 crore, so audit is required.

Answer: (a) Tax audit is not required, as both cash tests are met on aggregate receipts and payments and turnover is below ₹10 crore. (b) Tax audit is required, as aggregate cash payments exceed 5% of aggregate payments and turnover exceeds ₹1 crore.

Example 2

Meera, a consultant, had gross receipts of ₹48 lakh in the tax year. She is an eligible assessee for the presumptive scheme for professionals, where the deemed profit rate is 50%, but she declared profit of only ₹9.6 lakh. Her total income exceeds the maximum amount not chargeable to tax. She has no transfer pricing transactions and her return due date is 31 October. Is tax audit needed, and by when must the report be furnished?

Show the solution

Activity is profession. Her receipts of ₹48 lakh do not exceed the ₹50 lakh audit limit, so the turnover test alone does not require audit.
She is eligible for the professionals' scheme, since receipts are within ₹50 lakh (the limit is ₹75 lakh if the digital-receipts condition is met).
Deemed profit under the scheme is 50% × 48,00,000 = ₹24,00,000.
Declared profit of ₹9,60,000 is lower than the deemed ₹24,00,000. It is 20% of receipts (9,60,000 ÷ 48,00,000), against the 50% deemed rate.
Because she declares less than the deemed profit, she cannot rely on the scheme's relief from keeping full books and audit. Her total income exceeds the maximum amount not chargeable to tax, so both conditions of the presumptive audit trigger are met.
Audit therefore applies even though receipts are below ₹50 lakh. Confirm the wording of this trigger in the Act's provision on audit where profit is declared below the presumptive rate.
Due date: return due 31 October, less one month, gives 30 September.

Answer: Tax audit is required because she declared profit (20% of receipts) below the 50% deemed rate and her total income exceeds the exemption limit. The report must be furnished by 30 September, one month before the 31 October return due date.

Exam tips

Always write the cash percentages with figures in your working. Examiners give marks for the calculation even if the final verdict is wrong.
In case-scenario MCQs, look for hidden items such as capital receipts, loans and sale of assets. Decide whether each belongs in turnover or only in the cash tests.
For written answers, use provision, facts and conclusion form. Name the trigger, apply the numbers, and then state the due date and the penalty if asked.
Note whether the question refers to a business, a profession, or a person with both. Do not apply the ₹10 crore limit to professional receipts.
For presumptive cases, name the scheme before stating the trigger. Apply a lock-out only as the Act provides for that scheme; the 5-year lock-out is part of the small-business scheme.
Before using a date, check whether a transfer pricing report is required. It moves the return due date to 30 November, and the audit report date then falls on 31 October because the section sets it one month before the return due date.

Practice questions from Tax Audit and Ethical Compliances

Tax Audit Applicability and Due Dates: frequently asked questions

What is the turnover limit for tax audit under section 63 of the Income-tax Act, 2025?

For business, it is ₹1 crore of total sales, turnover or gross receipts. It rises to ₹10 crore if aggregate cash receipts and aggregate cash payments are each within 5% of the totals. For a profession, the limit is gross receipts above ₹50 lakh.

Does the 5% cash condition include capital transactions?

Yes. Cash receipts and payments on capital account are included in the totals and in the cash amounts. Compute aggregate receipts and aggregate payments separately and check that each is 5% or less.

Is tax audit needed if I have a loss?

Yes, if turnover or gross receipts exceed the applicable limit. The turnover tests do not depend on profit. An eligible presumptive-scheme taxpayer declaring lower profit than the deemed rate, with income above the exemption limit, also needs audit.

What is the due date to furnish the tax audit report?

The report must be furnished on or before the date specified in the section, which is one month before the due date for filing the return. For audit cases the return is generally due on 31 October, so the report is generally due by 30 September. Where a transfer pricing report is required, the return is due on 30 November, so the audit report is due by 31 October. Check the section for the exact categories of assessee.

What is the penalty for not getting accounts audited?

The penalty is the lower of 0.5% of turnover or gross receipts and ₹1,50,000. It does not apply if you prove reasonable cause for the failure. The penalty sits in the penalty provisions of the Income-tax Act, 2025, so take the section number and confirm the amount from the Act or the ICAI study material before quoting them.