Section 63 · Computation of total income
Section 63 of the Income-tax Act, 2025 — Tax Audit (Limits, Form No. 26 & Due Dates)
By CA Rajat Agrawal
Updated 04 Jul 2026
Chapter IV
📜 What the law says — Section 63, Income-tax Act 2025
63. (1) Every person, carrying on the business or profession fulfilling any of 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. Conditions for getting books of account audited
No.
A B
1. Every person—
(a) carrying on business shall, if his total sales, turnover or gross
receipts, as the case may be, in business exceed or exceeds one
crore rupees in any tax year, subject to the provisions of clause
(b);
(b) in case of a person whose—
(i) aggregate of all amounts received including amount
received for sales, turnover or gross receipts during the tax
year, in cash, does not exceed 5% of the said amount; and
(ii) aggregate of all payments made including amount incurred
for expenditure, in cash, during the tax year does not exceed
5% of the said payment,
clause (a) shall have effect as if for the words “one crore rupees”,
the words “ten crore rupees” had been substituted;
(c) carrying on profession shall, if his gross receipts in profession
exceed fifty lakh rupees in any tax year.
Sl. Conditions for getting books of account audited
No.
A B
2. If the person is carrying on business or profession, referred to in section
58(2) or 61(2) (Table: Sl. Nos. 4 and 5) and the profits and gains from such
business or profession are claimed to be lower than the deemed profits as
referred to in the said sections.
(2) The provisions of this section shall not apply where profits and gains of business
or profession, declared by the assessee are as per section 58(2) or 61(2).
(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 may be prescribed.
(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 professio
In plain language
What Section 63 says in plain English
Section 63 of the Income-tax Act, 2025 is the "tax audit" provision. It is the direct successor to the well-known Section 44AB of the Income-tax Act, 1961. It requires certain businesses and professionals to get their books of account audited by a Chartered Accountant and to file the resulting audit report with the Income-tax Department by a fixed date. The new Act takes effect from 1 April 2026, so Section 63 applies from Tax Year 2026-27 onward.
The purpose of a tax audit is simple: for larger businesses and higher-earning professionals, the government wants an independent CA to verify that the accounts are correct, that income is not understated, and that the numbers reported in the Income Tax Return actually tie back to the books.
Who must get a tax audit under Section 63
- Business turnover above ₹1 crore — every person carrying on business must get accounts audited if total sales, turnover or gross receipts exceed ₹1 crore in the tax year.
- Business turnover up to ₹10 crore (digital businesses) — the ₹1 crore limit is raised to ₹10 crore where BOTH cash receipts and cash payments are each 5% or less of the total. This rewards businesses that transact digitally.
- Professionals above ₹50 lakh — doctors, lawyers, architects, CAs, engineers and other notified professionals must audit if gross professional receipts exceed ₹50 lakh.
- Low-profit declarations — anyone eligible for presumptive taxation under Section 58(2) (business) or Section 61(2) (profession) who declares profits lower than the deemed rate must get audited.
The biggest change from Section 44AB — the "silent shift"
Under the old Section 44AB, if you did NOT opt into the presumptive scheme, you could keep normal books and simply escape audit as long as turnover was below the limit. Section 63 removes that cushion. The new law links audit directly to the profit you declare. If your business is of a type covered by the presumptive tables and you show profit below the deemed rate (broadly 6% for digital receipts and 8% for cash receipts), audit becomes mandatory — even if you never opted into presumptive taxation at all. This means many small, genuinely low-profit or loss-making businesses may now be pulled into audit.
One report, one form: Form No. 26
The multiple old forms (Form 3CA, 3CB and 3CD) are replaced by a single unified Form No. 26, prescribed under Rule 47 of the Income-tax Rules, 2026. It is divided into Parts A to D:
- Part A + Parts C & D — used when accounts are already audited under another law (e.g. a company audited under the Companies Act).
- Part B + Parts C & D — used when the audit is done solely under the Income-tax Act, 2025.
The deadline — "specified date"
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). For a taxpayer whose return is due 31 October, the audit report must be uploaded by 30 September. Miss the audit deadline and the return itself effectively cannot be finalised correctly.
Non-account-payee cheques count as cash
A carryover from the old law: cheques or bank drafts that are not marked "account payee" are deemed to be cash. This matters when testing the 5% cash limit for the ₹10 crore threshold — a business that uses ordinary bearer/crossed cheques may fail the digital test and be stuck at the ₹1 crore limit.
Penalty for not getting audited
Failure to get accounts audited or to furnish the report attracts a penalty of the lower of 0.5% of turnover/gross receipts or ₹1,50,000. The penalty can be waived if the taxpayer proves reasonable cause for the failure.
Practical implications
- Keep clean digital payment records to stay under the ₹10 crore umbrella instead of the ₹1 crore one.
- If your genuine profit is below the deemed rate, budget for audit costs and CA fees — you can no longer avoid audit merely by not opting for presumptive.
- Appoint your CA early; the report is due a full month before the return.
💡 Example
Example 1 — Digital trader. Rohan runs an electronics trading firm with turnover of ₹7.2 crore. All customer payments come via UPI and bank transfer, and he pays suppliers by NEFT — his cash receipts and cash payments are each under 1% of totals. Because both are within the 5% limit, his audit threshold is ₹10 crore, not ₹1 crore. Turnover of ₹7.2 crore is below ₹10 crore, so Rohan does NOT need a tax audit under Section 63.
Example 2 — Low-profit small business (the new trap). Meena runs a garment shop with turnover of ₹90 lakh. Her turnover is below ₹1 crore, so on the face of it no audit. But her actual profit is only ₹3 lakh — that is 3.3% of turnover, below the 6%/8% deemed rate under Section 58(2). Because she is declaring profit lower than the deemed rate for a presumptive-eligible business, Section 63 now makes her tax audit mandatory, even though she never opted for presumptive taxation. Under the old Section 44AB, Meena could have avoided audit by simply keeping regular books.
A relatable story. Suresh, a freelance architect, earned ₹58 lakh in professional receipts this year — his best year yet. He assumed audits were "only for big companies." His CA explained that professionals crossing ₹50 lakh fall under Section 63, and the audit report on Form No. 26 was due by 30 September, a month before his return. Because Suresh started the process late, his CA had to rush. He learned the lesson: cross the professional receipts limit once, and the tax audit clock starts ticking well before the return deadline.
| Category of person | Audit trigger under Section 63 | Threshold |
|---|
| Business (mostly cash) | Total sales / turnover / gross receipts exceed limit | ₹1 crore |
| Business (digital: cash ≤ 5% of receipts and ≤ 5% of payments) | Turnover exceeds higher limit | ₹10 crore |
| Profession | Gross professional receipts exceed limit | ₹50 lakh |
| Presumptive-eligible business [Sec 58(2)] | Declares profit lower than deemed rate (approx. 6% digital / 8% cash) | Any turnover |
| Presumptive-eligible profession [Sec 61(2)] | Declares profit lower than deemed rate (approx. 50%) | Any receipts |
| Audit report form | Single unified report (replaces 3CA/3CB/3CD) | Form No. 26 (Parts A-D) |
| Specified date to file report | One month before return due date | e.g. 30 September |
| Penalty for default | Lower of the two | 0.5% of turnover or ₹1,50,000 |
Related sections
Section 44AB (1961 Act) — the tax audit provision Section 63 replaces Section 58 — Presumptive taxation for eligible businesses Section 61 — Presumptive taxation for professionals Section 62 — Maintenance of books of account Section 263 — Due date for furnishing return of income Form No. 26 — Unified tax audit report (Rule 47)
Frequently asked questions
What is Section 63 of the Income-tax Act, 2025?
It is the tax audit provision that requires specified businesses and professionals to get their accounts audited by a Chartered Accountant and file the report. It replaces Section 44AB of the 1961 Act and applies from 1 April 2026.
What is the turnover limit for tax audit under Section 63?
The basic limit is ₹1 crore for businesses, raised to ₹10 crore if both cash receipts and cash payments are each 5% or less of the total. For professionals, the limit is ₹50 lakh of gross receipts.
What is the biggest change from Section 44AB?
Section 63 links audit to the profit you declare. If a presumptive-eligible business shows profit below the deemed rate (around 6%/8%), audit is now mandatory even if the person never opted for presumptive taxation — a protection that existed under the old law.
Which form is used for the tax audit report now?
A single unified Form No. 26 (Parts A to D), prescribed under Rule 47 of the Income-tax Rules, 2026, replaces the earlier Forms 3CA, 3CB and 3CD.
By when must the audit report be filed?
By the specified date, which is one month before the return filing due date. For a 31 October return deadline, the audit report must be furnished by 30 September.
What is the penalty if I don't get my accounts audited?
The penalty is the lower of 0.5% of turnover/gross receipts or ₹1,50,000. It can be waived if you show reasonable cause for the failure.
Do I still need a separate income-tax audit if my company is already audited under the Companies Act?
No separate audit is needed. If accounts are audited under another law, that audit satisfies Section 63, but you must still furnish the report (using Part A with Parts C and D of Form No. 26) by the specified date.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 04 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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