Advanced Direct Tax Laws and Practice · Tax Audit

Duties and Responsibilities of a Tax Auditor

Updated 11 October 2026 · Fact-checked

A tax auditor is an accountant who audits an assessee's accounts under section 63 of the Income-tax Act, 2025 and signs and verifies the audit report in the prescribed form. The duties are to examine books and records, check compliance, report required particulars, including inadmissible items, and stay within professional limits. The default fee for non-audit is under section 428.

Understand Duties and Responsibilities of Tax Auditor

A tax audit is not a company audit. Its purpose is to give the tax department a verified set of facts about the assessee's accounts, so that assessment is easier. The auditor does not decide the tax; the auditor reports facts and particulars.

Under section 63(1), a person carrying on business or profession who meets the conditions in the Table must get the accounts of the tax year audited by an accountant before the specified date. Under section 63(3), the assessee furnishes the audit report, in the prescribed form, duly signed and verified by the accountant, setting out the prescribed particulars. So the auditor's signature is a statement of responsibility, not a formality.

The auditor's work has three parts. First, examine whether proper books are kept, as required under section 62 and the rules. Second, check the entries against vouchers, bank records, invoices and other documents. Third, report the particulars the form asks for, such as payments in cash, items that are not allowable, and the other details in the prescribed form. Where something is not as it should be, the auditor reports it and does not hide it.

If the assessee is already required by another law to get accounts audited, section 63(4) says it is enough to get the accounts audited under that law before the specified date and to furnish that report along with the accountant's report in the prescribed form. The tax auditor then reports on tax matters in addition to the existing audit.

The duty also has a consequence side. The assessee, not only the auditor, bears the fee under section 428(c) for failing to get accounts audited and furnish the report. A failure to keep or retain books attracts a penalty under section 441. The tax auditor should therefore check these points while examining the books. Your answer in the exam should link duty, facts and consequence.

Key rules to remember

Audit threshold for business: Total sales, turnover or gross receipts in business > ₹1,00,00,000 (one crore); Section 63(1), Table Sl. No. 1(a). The limit becomes ₹10,00,00,000 if cash receipts and cash payments each do not exceed 5% of the respective aggregate amount (clause (b)).
Audit threshold for profession: Gross receipts in profession > ₹50,00,000; Section 63(1), Table Sl. No. 1(c).
Audit where profit is lower than deemed profit: Profits claimed lower than deemed profits under section 58(2) or 61(2) → audit required; Section 63(1), Table Sl. No. 2. Section 63(2) says the section does not apply where the assessee declares profits as per those provisions.
Specified date: Specified date = one month before the due date for furnishing return under section 263(1); Section 63(5)(a). Both the audit and the report must be furnished by this date.
Non-account payee cheque or draft: Cheque or draft that is not account payee = deemed cash payment or receipt; Section 63(5)(b). This matters for the 5% cash tests and for the cash particulars you report.
Fee for failure to audit and furnish report: ₹75,000 for delay up to one month; ₹1,50,000 thereafter; Section 428(c). Applies where the person fails to get accounts audited and furnish the report as required under section 63.
Penalty for books not kept or retained: ₹25,000; Section 441. For failure to keep and maintain books and documents per section 62 or retain them for the prescribed period.

How to solve Duties and Responsibilities of Tax Auditor questions

Use this order for any case question on the tax auditor's duties, reports or consequences. It follows the paper's pattern: provision, facts, conclusion.

1Identify the assessee and the activity: business or profession, and the amounts of turnover or gross receipts for the tax year.
2Test whether section 63 applies: the ₹1 crore or ₹50 lakh limits, the ₹10 crore relaxation if the 5% cash conditions are met, or the deemed profit case. Remember non-account payee cheques count as cash.
3Check whether the assessee falls under section 63(2) (profits declared as per the deemed profit provisions) or section 63(4) (audit already required under another law).
4State the auditor's duties on the facts: examine books and documents, verify entries, and report the particulars in the prescribed form, signed and verified.
5Fix the dates: compute the specified date as one month before the return due date and compare it with when the audit and report were done.
6State the consequence: fee under section 428(c) for non-audit or non-furnishing, and penalty under section 441 for books not kept or retained.
7Give a short conclusion with a practical point, such as obtaining documents, a management representation and a clear report.

Quickest way: Four-line answer frame

When to use it: Use when time is short and the question asks who must do what, by when, and what happens if they do not.

Line 1: apply the threshold (₹1 crore, ₹10 crore if cash is within 5%, or ₹50 lakh for profession).
Line 2: state the auditor's duty: examine, verify, report in the prescribed form, sign and verify.
Line 3: state the date: one month before the return due date.
Line 4: state the consequence: ₹75,000 if delay up to one month, ₹1,50,000 thereafter; ₹25,000 for books defaults.

Common mistakes in Duties and Responsibilities of Tax Auditor

Treating the ₹10 crore limit as automatic for everyone.
Students remember the higher number and forget the conditions.
Fix: Apply it only when cash receipts and cash payments each do not exceed 5% of the respective aggregate amounts. Check both.
Ignoring non-account payee cheques when counting cash.
The deeming rule is in the explanation-type sub-section 63(5)(b) and is easy to skip.
Fix: Add non-account payee cheques and drafts to cash receipts and payments before testing the 5% limit.
Saying the auditor files the report.
Students confuse signing with furnishing.
Fix: The accountant signs and verifies the report. The assessee furnishes it by the specified date under section 63(3).
Computing the specified date from the end of the tax year.
Students remember a calendar date instead of the rule.
Fix: Use the rule: one month before the due date for the return under section 263(1).
Mixing the fee under section 428(c) with the penalty under section 441.
Both relate to books and audit, so they look alike.
Fix: Section 428(c) concerns failure to audit and furnish the report (₹75,000 or ₹1,50,000). Section 441 concerns failure to keep, maintain or retain books (₹25,000).
Confusing tax audit under section 63 with a direction for audit under section 268(5).
Both involve an accountant and a report.
Fix: Section 63 is a statutory audit by threshold. Under section 268(5) the Assessing Officer directs an audit with prior approval of the Commissioner-level authority, after hearing the assessee, and the accountant is nominated by that authority.

Worked examples

Example 1

Rohan Traders, a proprietary business in Pune, has a turnover of ₹3 crore for the tax year. Its cash receipts are 3% of total receipts and cash payments are 4% of total payments. Is a tax audit needed? What must the auditor do, and what if the report is furnished one month late?

Show the solution

Turnover is ₹3 crore, above ₹1 crore, so section 63(1) would apply under clause (a).
Check clause (b): cash receipts are 3%, within 5%, and cash payments are 4%, within 5%. Both conditions are met, so the limit is read as ₹10 crore.
₹3 crore does not exceed ₹10 crore, so no tax audit is required under section 63 on the turnover test.
If the person did not need an audit, no auditor duties or fee arise under section 63 or section 428(c).
Add the caution: if any receipt or payment was by a non-account payee cheque or draft, it would count as cash. Re-test the 5% limits with those included.

Answer: No tax audit is required, because both cash conditions are within 5% and the turnover of ₹3 crore does not exceed ₹10 crore. The result would change if non-account payee cheques or drafts pushed cash above 5%. Any related late-filing question does not arise, since no audit was required.

Example 2

Meera Sharma, a consultant, has gross receipts of ₹62 lakh in the tax year. She did not get her accounts audited and furnished no report until one month and ten days after the specified date. What are the duties of the auditor, and what is the consequence for Meera?

Show the solution

Profession threshold: gross receipts ₹62 lakh exceed ₹50 lakh, so section 63(1) applies and an audit is required.
The auditor's duties: examine her books, vouchers and bank records, verify entries, and report the prescribed particulars, signing and verifying the report. The assessee furnishes it by the specified date under section 63(3).
Specified date: one month before the return due date under section 263(1).
Default: she failed to get the accounts audited and furnish the report as required. Section 428(c) applies.
Delay period: the failure continued for more than one month, so the second slab applies: ₹1,50,000. The ₹75,000 slab is for delay up to one month.
Also check books: if books under section 62 were not kept, section 441 can add a penalty of ₹25,000.

Answer: An audit was required because receipts of ₹62 lakh exceed ₹50 lakh. Meera is liable to a fee of ₹1,50,000 under section 428(c), since the failure continued beyond one month. A further penalty of ₹25,000 under section 441 may apply if she also failed to keep or retain the books required.

Exam tips

Begin with the threshold test and show the numbers. Marks usually go for the correct limit and for the 5% cash conditions.
Name the sections: 63 for audit, 428(c) for the fee, 441 for books. Do not quote a section unless you are sure of it.
Write the auditor's role in action words: examine, verify, report, sign and verify. Keep the assessee's duty to furnish separate.
Use the two fee slabs correctly: ₹75,000 up to one month and ₹1,50,000 thereafter.
In case questions, end with a practical point: obtain documents, check cash and cheque details, and meet the specified date.

Practice questions from Tax Audit

Duties and Responsibilities of Tax Auditor in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Duties and Responsibilities of Tax Auditor: frequently asked questions

Who is responsible for furnishing the tax audit report?

The assessee furnishes the report by the specified date. The accountant signs and verifies it in the prescribed form. Both have separate duties.

What is the penalty for failure to get accounts audited under the Income-tax Act, 2025?

Section 428(c) imposes a fee of ₹75,000 for a delay of up to one month and ₹1,50,000 thereafter. It applies where a person fails to get accounts audited and furnish the report as required under section 63.

Is a tax audit needed if accounts are audited under another law?

Section 63(4) says it is enough to get the accounts audited under that law before the specified date. You must also furnish that audit report along with the accountant's report in the prescribed form by that date.

How is the specified date fixed?

Under section 63(5)(a), it is one month before the due date for furnishing the return of income under section 263(1).

Can the Assessing Officer order a separate audit?

Yes. Under section 268(5), after giving the assessee a reasonable opportunity of being heard and with previous approval of the Commissioner-level authority, the officer may direct an audit. The accountant is nominated by that authority, and the expenses are paid by the Central Government.