Section 44AB of Income Tax Act makes a business get its accounts audited by a chartered accountant when turnover goes above ₹1 crore in the year, or ₹10 crore if both cash receipts and cash payments stay at no more than 5% of the total. A professional needs the audit once gross receipts cross ₹50 lakh.
For FY 2025-26 (AY 2026-27) the auditor reports in Form 3CA or 3CB with Form 3CD. The CBDT moved the audit report date for AY 2026-27 to 21 October and the return date for audit cases to 21 November. From tax year 2026-27 this duty is found in section 63 of the new Income-tax Act, 2025. Small traders on the presumptive scheme should also read the 44AD guide, since leaving that scheme can pull them into an audit.
Quick facts
Business limit
Turnover above ₹1 crore; ₹10 crore if cash receipts and cash payments are each 5% or lessProfession limit
Gross receipts above ₹50 lakhReport for AY 2026-27
Form 3CA or 3CB, plus the Form 3CD statementAudit report due, AY 2026-27
21 October (extended from 30 September)Return due, audit cases
21 November for AY 2026-27 (extended from 31 October)Penalty (271B)
0.5% of turnover or receipts, capped at ₹1,50,000Under the 2025 Act
Section 63; report in Form 26 from tax year 2026-27
The five cases in section 44AB of income tax act
| Clause | Who is covered | Trigger |
|---|---|---|
| 44AB(a) | Any business | Turnover or sales above ₹1 crore. The limit rises to ₹10 crore when cash receipts and cash payments are each 5% or less of the totals |
| 44AB(b) | Any profession | Gross receipts above ₹50 lakh |
| 44AB(c) | Transport operators and certain non-resident businesses on presumptive schemes (44AE, 44BB, 44BBB) | Profit shown below the presumptive figure |
| 44AB(d) | Professionals on 44ADA | Profit shown below 50% of receipts and total income above the basic exemption limit |
| 44AB(e) | Small businesses covered by 44AD(4) | Opted out of 44AD within the lock-in and total income above the basic exemption limit |
Clauses (a) and (b) are about size. Clauses (c), (d) and (e) are about people who were allowed to skip books under a presumptive scheme and then chose to show a lower profit. The law asks for an audit in return for that choice. A doctor with ₹30 lakh of receipts who shows profit of ₹10 lakh, for example, falls under clause (d) even though receipts are far below ₹50 lakh.
Income tax audit limit and the 5% cash test
The ₹10 crore limit is not automatic. Both halves of the test must hold for the year: cash received is 5% or less of all receipts, and cash paid is 5% or less of all payments. A cheque that is not account payee counts as cash for this purpose. Fail either half and the plain ₹1 crore limit applies.
A hardware wholesaler, FY 2025-26. Turnover is ₹6.5 crore. Cash sales are ₹20 lakh, which is about 3.1% of receipts. Cash spent on purchases and wages is ₹15 lakh out of ₹5.8 crore of payments, about 2.6%. Both figures are within 5%, so the limit is ₹10 crore and no audit is needed under clause (a).
Now change one number. If cash sales had been ₹40 lakh, that is about 6.2% of receipts. The test fails, the limit drops to ₹1 crore and the ₹6.5 crore turnover needs an audit. Missing it would cost 0.5% of ₹6.5 crore, which is ₹3,25,000, but the penalty is capped, so the bill would be ₹1,50,000.
Income tax audit due date and extension for AY 2026-27
| Filing | Date in the Act | Extended date |
|---|---|---|
| Tax audit report (Form 3CA or 3CB with 3CD) | 30 September | 21 October |
| ITR for audit cases | 31 October | 21 November |
| ITR with a transfer pricing report | 30 November | No change announced |
| Belated ITR | 31 December | No change announced |
| Revised ITR | 31 March | Finance Act, 2026; fee under section 234I after 31 December |
The extension came by a CBDT press release and circular. The audit report must be uploaded before the return, because the return pulls key figures from it. Treat 21 October as the last day for the report for AY 2026-27 and 21 November as the last day for the return. If either date shifts again, the portal will show it first.
Steps to file the audit report online
- Sign in with your PAN as the user ID at the e-filing portal.
- Go to Authorised Partners > My Chartered Accountant and add your CA by membership number.
- In e-File, the Income Tax Forms option leads to File Income Tax Forms; there, pick Form 3CA-3CD or 3CB-3CD, choose AY 2026-27 and assign it to the CA.
- The CA prepares the report in the offline utility, signs it with a digital signature and uploads it.
- Open Worklist > For Your Action, check the report and accept it. Until you accept, it does not count as filed.
- File the ITR after acceptance, quoting the date and acknowledgement of the audit report.
Many delays come from the last step: the CA uploads on time but the business owner forgets to accept. Build a day for this into your calendar.
What the auditor reports, including section 43CA
Form 3CD runs to over forty clauses. Some that small businesses often get questions on:
- Cash payments above ₹10,000 in a day to one person, which are disallowed under section 40A(3). See the cash limits guide.
- Dues to employees and statutory payments paid late, linked to section 43B.
- TDS defaults: payments where tax was not deducted or was paid late.
- Section 43CA: when a builder or dealer sells land or a building held as stock below the stamp duty value, that value is taken as the sale price, unless it is within 110% of the agreed price.
- Loans or deposits taken or repaid in cash, which breach sections 269SS and 269T.
Section 44AB in the Income-tax Act, 2025
| Point | FY 2025-26 (AY 2026-27) | Tax year 2026-27 onward |
|---|---|---|
| Law | Section 44AB, 1961 Act | Section 63, 2025 Act |
| Report form | Form 3CA or 3CB with Form 3CD | Form 26 (one combined form) |
| Year label | Assessment year paired with previous year | Tax year |
| Turnover and receipt limits | ₹1 crore, ₹10 crore with the cash test, ₹50 lakh for professions | Carried over |
The department's FAQ on Form 26 says the old forms still apply to audits up to AY 2026-27. Accounts for the year that began on 1 April 2026 will be reported in Form 26 under the new Act and Rules. For a wider view of the switch, see the 2025 Act overview.
Tax audit errors that cost money
| Problem | Fix |
|---|---|
| Counting only sales, not the cash share, before deciding on the ₹10 crore limit | Work out cash receipts and cash payments as a percentage every quarter |
| Professional with low receipts shows a small profit under 44ADA and skips the audit | Clause (d) applies when income is above the exemption limit; get the audit or show 50% |
| Report uploaded but not accepted by the taxpayer | Accept it under Worklist before the due date |
| Return filed before the audit report | File the report first; a return without it can be treated as defective |
| Penalty notice under 271B | Reply with the reason for delay; section 273B lets the officer drop the penalty for a reasonable cause |
This guide gives general information on audit rules and dates. It is not advice for your business. Limits and dates can change by notification, so for your own case, have them confirmed by your chartered accountant or on the department's portal.
Sources we checked
- Income-tax Act, 1961, section 44AB
- Income-tax Act, 1961, section 271B
- Income-tax Act, 2025, section 63
- CBDT press release on audit due dates for AY 2026-27
- Income-tax Rules, 2026, Form 26 FAQ
Frequently asked questions
What are the income tax audit report due date and final date for AY 2026-27?
Sec 44AB of income tax act ties the report to a date one month before the return. The Act sets 30 September, but the CBDT extended it to 21 October for AY 2026-27. The return for audit cases moved from 31 October to 21 November.
What is the income tax audit limit for FY 2025-26?
A business needs an audit when turnover is above ₹1 crore, or above ₹10 crore when both cash receipts and cash payments are 5% or less each. A profession needs one when gross receipts cross ₹50 lakh.
What is section 44AB(e) of income tax act?
It covers a small business that falls under 44AD(4): it left the presumptive scheme within five years of choosing it, and its income crosses the basic exemption limit. Such a business must keep books and get them audited.
What is Form 3CD in income tax?
Form 3CD is the statement of particulars the auditor fills with the audit report. It lists items such as cash payments, TDS defaults, late statutory dues and loans taken in cash. Form 3CA is used when accounts are already audited under another law and Form 3CB in other cases.
What is Form 26 in income tax?
The single tax audit report for section 63 of the 2025 Act, prescribed by the Income-tax Rules, 2026, is Form 26. It replaces Forms 3CA, 3CB and 3CD for tax year 2026-27 onward.
What is the penalty for not getting a tax audit?
Section 271B levies 0.5% of turnover or gross receipts, up to ₹1,50,000. It can be waived if you show a reasonable cause for the failure.