Tax audit
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 63(1) of Income Tax Act 2025
63(1) Every person, carrying on the business or profession fulfilling the conditions specified in column B of the Table below, shall get his accounts of the tax year audited by an accountant, before the specified date.
Table
| Sl. No. | Conditions for getting books of account audited |
|---|---|
| A | B |
| 1 | Where the total sales, turnover or gross receipts from business or profession during the tax year of any person who–– (a) is carrying on business and at least 95% of aggregate of all the receipts and payments from the business during the tax year are through specified banking or online mode, is more than ₹10,00,00,000; (b) is carrying on business and not covered under serial number 1, is more than ₹1,00,00,000; (c) is carrying on profession, is more than ₹50,00,000. |
| 2 | If the person is carrying on business or profession, referred to in section 58(2) or 61(2) (other than that referred to in section 61(2) [Table: Sl. No. 6]) and the profits and gains from such business or profession are claimed to be lower than the deemed profits as referred to in these sections. |
Section 63(2) of Income Tax Act 2025
63(2) The provisions of this section shall not apply,––
- (a) where profits and gains of business or profession, declared by the assessee are as per section 58(2);
- (b) where the person, other than that referred in section 61(2) (Table: Sl. No. 6), is deriving income of the nature referred to in section 61(2).
Section 63(3) of Income Tax Act 2025
63(3) The assessee shall furnish by the specified date, the report of such audit in such form, duly signed and verified by the accountant and setting forth such particulars, as prescribed.
Section 63(4) of Income Tax Act 2025
63(4) Where a person is required, by or under any other law, to get his accounts audited, then it shall be sufficient compliance of this section, if such person––
- (a) gets the accounts of such business or profession audited under such law before the specified date; and
- (b) furnishes by that specified date the report of such audit along with the report of the accountant in the form as prescribed.
Section 63(5) of Income Tax Act 2025
63(5) In this section, “specified date” in relation to the accounts of the assessee of the tax year, means the date one month prior to the due date for furnishing the return of income under section 263(1).
FAQs on Section 63 of Income Tax Act 2025
1. What is the legal requirement for a tax audit under Section 63(1) of the Income Tax Act, 2025?
Every person carrying on business or profession must get their accounts audited if they meet certain conditions specified in the audit threshold table under Section 63(1).
2. What is the audit threshold for a business where 95% of transactions are via specified banking or online modes?
Audit is mandatory if total sales, turnover, or gross receipts exceed ₹10 crore in the tax year.
3. What is the audit threshold for a business not meeting the 95% digital transaction condition?
Audit is mandatory if total sales, turnover, or gross receipts exceed ₹1 crore in the tax year.
4. What is the audit threshold for professionals?
Audit is required if gross receipts from the profession exceed ₹50 lakh during the tax year.
5. When is audit mandatory under presumptive taxation schemes?
If profits and gains from business or profession are claimed to be lower than the deemed profits under Section 58(2) or Section 61(2), then audit is required (except for Section 61(2) [Sl. No. 6] cases).
6. Is audit required if income is declared as per Section 58(2)?
No, Section 63(2)(a) specifically exempts such cases from audit.
7. Is audit applicable to certain presumptive income cases under Section 61(2)?
No, if the income is of the nature referred to in Section 61(2) (other than Sl. No. 6), audit is not applicable.
8. What is the deadline for furnishing the audit report under Section 63(3)?
The audit report must be furnished by the “specified date”, which is one month before the due date for filing the return under Section 263(1).
9. What must the audit report contain?
The report must be in the prescribed form, duly signed and verified by an accountant, setting forth prescribed particulars.
10. If a person is already getting audited under another law, is separate tax audit needed?
No. As per Section 63(4), audit under other law is sufficient if completed and submitted with the tax audit report format before the specified date.
11. What must be submitted if audit is done under another law?
The person must furnish the report under that law along with a prescribed audit report by an accountant.
12. What is the definition of “specified date” in the context of a tax audit?
The specified date is one month prior to the due date for furnishing the income tax return under Section 263(1).
13. Who is qualified to conduct a tax audit under Section 63?
An “accountant”, as defined under the Act, is qualified to perform the audit.
14. Does the digital mode of transactions affect the audit threshold?
Yes. If at least 95% of business receipts and payments are through digital modes, the threshold for mandatory audit is increased to ₹10 crore.
15. Are individuals running small businesses or professions exempt from audit?
Yes, if their turnover or receipts are below the specified thresholds and presumptive income is declared properly.
16. Can audit requirements vary based on the mode of transaction used by the business?
Yes, businesses with high digital transaction compliance have a higher audit threshold.
17. Are there any reporting requirements if audit is done under another law but not in the tax audit format?
Yes, the audit must still be accompanied by the prescribed format of audit report under Section 63.
18. Is audit required if the business shows higher income than presumptive norms?
No, audit is not required if income is not lower than presumptive norms under Sections 58(2) or 61(2).
19. What happens if the audit report is not furnished by the specified date?
This may lead to non-compliance consequences, including penalties under relevant sections of the Act.
20. Can audit be avoided by voluntarily declaring higher income under presumptive taxation?
Yes, if income is declared as per or higher than deemed profits under presumptive provisions, audit may not be required.
Section 63 of the Income Tax Act, 2025 mandates tax audit for businesses and professionals exceeding prescribed thresholds, or where income is claimed lower than deemed profits under presumptive taxation schemes. The audit aims to ensure financial transparency, compliance, and accuracy in income reporting.
However, relief is provided for those maintaining digital transactions and for those already audited under other laws, simplifying compliance. Timely furnishing of the audit report in the prescribed form by a qualified accountant is essential to avoid penalties and fulfill statutory obligations.
