Tax audit under the Income-tax Act 2025: who needs it
A tax audit is an audit of a business's accounts under the income-tax law, now section 63, required above ₹1 crore turnover (₹10 crore if cash is low).
Short answer
A tax audit is an audit of a taxpayer's books of account by a chartered accountant under the income-tax law, to verify that income, deductions and compliance are correctly reported. Under the Income-tax Act, 2025 it is required by section 63, which replaced section 44AB. It applies to businesses and professionals above specified turnover or receipts thresholds.
- Provision
- Section 63, Income-tax Act 2025 (formerly 44AB)
- Business threshold
- Turnover above ₹1 crore; ₹10 crore if cash receipts and payments are each within 5%
- Professionals
- Gross receipts above ₹50 lakh
- Done by
- Practising chartered accountant
Who needs a tax audit
A business must get its accounts audited if its turnover exceeds ₹1 crore in the tax year. The limit rises to ₹10 crore if cash receipts and cash payments are each not more than 5% of the total. A professional needs an audit if gross receipts exceed ₹50 lakh. Taxpayers who opt out of the presumptive scheme and declare lower profits than prescribed may also need an audit if their income exceeds the basic exemption limit. These thresholds carried over from the 1961 Act, but confirm them for the year you are reporting.
What the audit report covers
The auditor reports in the prescribed forms, which under the old rules were Form 3CA or 3CB with the detailed statement in Form 3CD. The report covers items such as the method of accounting, depreciation, TDS compliance, payments to related persons, loans and deposits, and disallowances. It must be furnished electronically, ahead of the return due date, and the taxpayer must approve it on the e-filing portal.
Why it matters for startups
Companies already have a statutory audit, but the tax audit is a separate report with its own deadline and penalties for delay. Fast-growing startups often cross ₹1 crore turnover in their second or third year; with mostly digital receipts the ₹10 crore limit may apply. Clean books, TDS compliance and documented related party payments make the tax audit smoother.
Related services
Sources
- EZTax: Income-tax Act 1961 vs 2025 section mapping
- Income Tax Department: Acts, rules and circulars
- Institute of Chartered Accountants of India
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
Is a tax audit required if the company is in loss?
It depends on turnover, not profit. If turnover exceeds the threshold, a tax audit is required even with a loss.
Can the statutory auditor do the tax audit?
Yes. The same chartered accountant can conduct both audits.
What is the penalty for not getting a tax audit?
A penalty linked to turnover applies under the income-tax law, subject to a cap, unless there is reasonable cause.