Tax audit report: Form 26 under the 2025 Act, Forms 3CA/3CB/3CD for FY 2025-26

Who needs a tax audit?

A business needs a tax audit when its turnover or gross receipts exceed ₹1 crore in the year. The limit rises to ₹10 crore where cash receipts and cash payments are each no more than 5% of the total. A professional needs one when gross receipts exceed ₹50 lakh. Taxpayers who opt out of presumptive taxation or declare profits below the presumptive rate, with income above the basic exemption limit, can also be covered.

The audit is done by a practising chartered accountant, who uploads the report on the e-filing portal. The taxpayer must then accept it from its own login. Only after acceptance is the report treated as filed.

Old forms and the new Form 26

For FY 2025-26, assessed under the 1961 Act, the report is Form 3CA where accounts are already audited under another law, such as a company, or Form 3CB otherwise, with the statement of particulars in Form 3CD. From tax year 2026-27, the Income-tax Rules 2026 replace all three with a single Form 26 under section 63 of the Income-tax Act 2025.

Form 26 is organised in parts rather than the 44 clauses of Form 3CD. Commentaries describe new sections on digital transaction percentages, GST and TDS filing status, and virtual digital assets, with TDS references moved to the consolidated section 393. The first Form 26 reports will be filed in 2027.

Penalty becomes a fixed fee

Under the 1961 Act, failing to get accounts audited or furnish the report attracts a penalty under section 271B of 0.5% of turnover or gross receipts, capped at ₹1.5 lakh, which can be waived for reasonable cause. This applies to FY 2025-26 reports.

The Finance Act 2026 replaced the penalty under the new Act with a fee in section 428. From tax year 2026-27, a report furnished up to one month late attracts ₹75,000, and beyond one month ₹1,50,000. Because it is a fee rather than a penalty, a one-day delay costs the full ₹75,000 and there is no reasonable-cause defence.

What data does the auditor need?

A tax audit covers far more than the profit and loss account, and the auditor reports on compliance with many other provisions. Expect requests for the following, and keep them organised before the audit starts.

• Books of account, fixed asset register and depreciation workings
• TDS and TCS compliance details, including returns filed and any short deduction
• GST returns and reconciliation of turnover
• Payments to related parties and cash payments above the permitted limits
• Loans and deposits accepted or repaid in cash, and MSME payables beyond the agreed period
• Quantitative details of stock for manufacturers and traders

Common errors and consequences

Common issues include accepting the report after the due date, reporting figures that do not match the return, missing disallowances for late payment to MSMEs or unpaid statutory dues, and inconsistent GST turnover. Officers use audit report data for automated adjustments when processing the return, so any inconsistency tends to surface as a demand.

Plan the audit early: the report must be filed and accepted before the return. Refogo's partner professionals, who are practising chartered accountants, can carry out tax audits for a fixed fee.

Step by step

1. 1Check applicability

   Compare turnover, cash share and receipts with the section 44AB or section 63 limits.

2. 2Appoint a chartered accountant

   Engage a CA and add them on the e-filing portal for the audit form.

3. 3Provide records

   Share books, registers, GST and TDS data and supporting documents.

4. 4CA uploads the report

   The CA files Forms 3CA/3CB-3CD for FY 2025-26, or Form 26 from tax year 2026-27.

5. 5Accept on the portal

   Accept the report from your login before the due date so it counts as filed.