Section 63 Income Tax Act 2025: Who Needs a Tax Audit?
Section 63 sets out when a person carrying on business or profession must have accounts audited by an accountant. This guide explains the turnover limits, 5% cash transaction test, presumptive income rules, reporting forms and filing deadline.
Updated: 10 November 2026 | Chapter IV - Computation of Total Income
What does Section 63 of the Income-tax Act, 2025 require?
Section 63(1) requires every person carrying on business or profession who meets a condition in its statutory table to have the accounts of the relevant tax year audited by an accountant before the specified date. Under Section 63(3), the assessee must furnish the prescribed audit report, signed and verified by the accountant, by that date.
A tax audit is not automatically required for every business or profession. The nature of the activity, turnover or receipts, cash transaction percentages and applicable presumptive taxation provisions must be examined.
What are the tax audit limits under Section 63?
| Category | When tax audit is required |
|---|---|
| Business - general rule | Total sales, turnover or gross receipts exceed Rs. 1 crore in the tax year, subject to the enhanced limit. |
| Business - qualifying low-cash transactions | Limit increases to Rs. 10 crore where both cash receipts and cash payments are each no more than 5% of their respective aggregates. |
| Profession | Gross receipts exceed Rs. 50 lakh in the tax year. |
| Specified presumptive cases | Audit may be required when profits are declared below the deemed amount under the specified provisions of Sections 58(2) or 61(2), subject to Section 63's conditions and exceptions. |
The statutory wording is exceed. Merely reaching the relevant monetary threshold does not, by itself, satisfy that turnover test.
How does the 5% cash transaction rule work?
The enhanced Rs. 10 crore business threshold applies only when both conditions are satisfied: (1) cash receipts are not more than 5% of aggregate receipts, and (2) cash payments are not more than 5% of aggregate payments. Each percentage is tested separately.
Under Section 63(5)(b), receipts or payments through a cheque or bank draft that is not account payee are deemed cash for this purpose.
Does presumptive taxation remove the tax audit requirement?
Section 63(2) provides an exception where profits and gains are declared in accordance with Section 58(2) or Section 61(2). Conversely, the table in Section 63(1) includes certain cases where a person declares profits lower than the deemed profits under Section 58(2) or the specified entries of Section 61(2). These provisions must be read together with their eligibility conditions; the mere use of the word "presumptive" does not resolve audit applicability.
See Section 58 and Section 61.
Which audit report must be filed and what is the due date?
Section 63(3) requires the audit report to be filed by the specified date. Section 63(5)(a) defines that date as one month before the applicable return-filing due date under Section 263(1). The applicable deadline should be checked for the relevant taxpayer and tax year, including any lawful extension.
Under Rule 47 of the Income-tax Rules, 2026, tax audit reporting is through Form No. 26: Part A applies where accounts are also audited under another law, Part B to other tax-audit cases, and Parts C and D contain prescribed particulars. For Tax Year 2026-27, the Income Tax Department identifies 30 September 2027 as the tax audit report due date, subject to any subsequent extension.
Where accounts are audited under another law, Section 63(4) permits compliance by completing that audit before the specified date and furnishing its report along with the prescribed accountant's report by that date.
Relevant statutory definitions
What happens if a required tax audit is not completed?
Section 446 of the Income-tax Act, 2025 provides that the Assessing Officer may impose a penalty for failure to get accounts audited or furnish the audit report as required under Section 63. The penalty is the lower of 0.5% of the relevant sales, turnover or gross receipts and Rs. 1,50,000. Any applicable statutory relief or defence must be considered on the facts.
Frequently asked questions
Is tax audit compulsory when business turnover exceeds Rs. 1 crore?
Generally yes, unless the enhanced Rs. 10 crore limit applies because both cash receipt and cash payment tests are met, or another applicable statutory exception governs.
Is the tax audit limit Rs. 10 crore for every business?
No. The Rs. 10 crore threshold is conditional on cash receipts and cash payments each being no more than 5% of the corresponding aggregate.
What is the tax audit threshold for professionals?
Gross professional receipts exceeding Rs. 50 lakh trigger the turnover-based audit requirement under Section 63.
Which form replaces Forms 3CA, 3CB and 3CD for Tax Year 2026-27?
Form No. 26 under Rule 47 of the Income-tax Rules, 2026.
Does an audit under company law eliminate tax audit reporting?
No. Section 63(4) allows the audit under another law to satisfy the accounts-audit requirement, but the prescribed accountant's tax audit report must also be furnished.
Official statutory sources
Readers should verify subsequent amendments, notifications and deadline extensions before filing.