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For FY 2025-26 (AY 2026-27), tax audit is governed by Section 44AB of the Income-tax Act, 1961. A business needs an audit if turnover exceeds ₹1 crore – or ₹10 crore where both cash receipts and cash payments stay within 5% of the respective totals. Professionals need an audit above ₹50 lakh in gross receipts. The audit report on Form 3CA/3CB with Form 3CD is due 30 September 2026, and the income tax return is due 31 October 2026.
If you run a business or a professional practice in Gurgaon, tax audit is the compliance event that decides how the rest of your filing season goes. Miss the threshold test and you file the wrong return. Miss the deadline and you pay a penalty calculated on turnover, not on tax.
This year there is a second thing to get right. The Income-tax Act, 2025 came into force on 1 April 2026, and it changes both the section number and – more importantly – the trigger for tax audit. That change does not affect the audit you are doing right now, but it will affect the one you do next year, and for a large number of low-margin businesses in Gurgaon it will bring them into the audit net for the first time.
This guide covers both years.
This is the question causing the most confusion in Gurgaon offices right now, so it is worth settling before anything else.
| Financial Year | Governing Act | Provision | Report Form | Report Due |
|---|---|---|---|---|
| FY 2024–25 (AY 2025–26) | Income-tax Act, 1961 | Section 44AB | Form 3CA / 3CB + Form 3CD | Passed |
| FY 2025–26 (AY 2026–27) | Income-tax Act, 1961 | Section 44AB | Form 3CA / 3CB + Form 3CD | 30 September 2026 |
| FY 2026–27 (Tax Year 2026–27) | Income Tax Act, 2025 | Section 63 | Form No. 26 | 30 September 2027 |
The Income-tax Act, 2025 took effect from 1 April 2026. But Assessment Year 2026-27 assesses income earned during FY 2025-26 – a period that fell entirely under the old Act. So the audit you are completing in September 2026 is still a Section 44AB audit, on Forms 3CA/3CB and 3CD.
Section 63 and Form No. 26 apply from Tax Year 2026-27 onwards. If your auditor is quoting Section 63 for the current year’s report, that is wrong.
The thresholds under Section 44AB are unchanged for FY 2025-26.
| Taxpayer | Threshold | Condition |
|---|---|---|
| Business | ₹1 Crore | Standard turnover threshold for mandatory tax audit under Section 44AB. |
| Business | ₹10 Crore | Applicable where cash receipts do not exceed 5% of total receipts and cash payments do not exceed 5% of total payments. |
| Profession | ₹50 Lakh | Gross professional receipts exceed ₹50 lakh during the financial year. |
| Presumptive Taxation – Section 44AD | ₹2 Crore (Extended to ₹3 Crore) | The enhanced ₹3 crore limit applies only when the 5% cash receipts/payment condition is satisfied. |
| Presumptive Taxation – Section 44ADA | ₹50 Lakh (Extended to ₹75 Lakh) | The enhanced ₹75 lakh limit applies only when the 5% cash receipts/payment condition is satisfied. |
The 5% cash test, worked through
Most guides state the ₹10 crore threshold and stop there. The test is stricter than it reads, and it is where businesses get caught.
Both limbs must be satisfied independently. Passing on receipts and failing on payments means you fall back to the ₹1 crore threshold.
Take a Gurgaon trading firm with turnover of ₹4.2 crore:
Total receipts ₹4.4 crore, of which ₹9 lakh in cash. That is 2.04% – receipts limb passed.
Total payments ₹4.1 crore, of which ₹26 lakh in cash. That is 6.34% – payments limb failed.
Result: the ₹10 crore threshold is unavailable. Turnover is ₹4.2 crore, above ₹1 crore, so tax audit applies.
Two traps worth naming. First, a payment or receipt made by a cheque or bank draft that is not account-payee is treated as cash for this test. Second, the denominator is total receipts and total payments – not just sales and purchases. Capital introductions, loan receipts, loan repayments and asset purchases all belong in the calculation. Firms that compute the percentage on sales alone routinely arrive at the wrong answer.
From FY 2026-27, Section 63 of the Income-tax Act, 2025 replaces Section 44AB. The turnover thresholds carry over largely unchanged. The trigger does not.
The change that matters
Under Section 44AB, a business declaring thin profits could avoid audit provided it had never opted into presumptive taxation under Section 44AD. Low margin plus proper books plus no presumptive history equalled no audit.
Section 63 removes that route. Where a business falls within the presumptive category under Section 58(2) – the new Act’s equivalent of Section 44AD – and declares profit below the deemed rate of 6% or 8%, audit is triggered on the profit figure itself, regardless of whether the taxpayer ever opted into the scheme.
The audit obligation is now linked to declared profitability, not to the taxpayer’s choice.
Worked example
A Gurgaon distribution business: turnover ₹1.5 crore, 3% cash receipts, no Section 44AD history, actual net profit 5%.
Under the old Act – no audit. Turnover is below the ₹10 crore digital threshold and the business never entered the presumptive scheme.
From FY 2026-27 – audit mandatory, because declared profit of 5% is below the 6% deemed rate for a digitally-transacting business.
This is a genuine expansion of the audit population, and it lands hardest on high-turnover, low-margin businesses: distributors, traders, contractors and logistics operators – a large share of Gurgaon’s SME base.
There is a qualifying condition to note. The lower-profit trigger operates where total income also exceeds the maximum amount not chargeable to tax. A business declaring low profit and falling below the basic exemption limit is a different case and should be assessed on its facts.
Two carve-outs survive in the new Act. Section 63(2)(a) exempts taxpayers who declare income in line with Section 58(2), and certain cases under Section 61(2) – other than those at Sl. No. 6 of that table – remain outside the audit requirement.
If your margins run below 6%, the decision from FY 2026-27 is a real one: declare 6% and pay tax on profit you did not earn, or declare actual profit, maintain books and accept the audit. That is a planning conversation to have before the year closes, not after.
Yes, in several situations. Turnover alone does not settle the question.
The taxpayer declares profit below the presumptive rate and total income exceeds the basic exemption limit.
The taxpayer opted into Section 44AD, then opted out. Opting out locks the taxpayer out of the scheme for the next five assessment years, and during that period an audit is required if total income exceeds the exemption limit.
A professional under Section 44ADA declares income below 50% of gross receipts.
The taxpayer is covered by Section 44AE, 44BB or 44BBB and declares income below the deemed figure.
From FY 2026-27, add the Section 63 lower-profit trigger described above, which applies whether or not the taxpayer ever entered the scheme.
| Compliance | Due Date |
|---|---|
| Tax Audit Report (Form 3CA / 3CB with Form 3CD) | 30 September 2026 |
| Income Tax Return (ITR) – Audit Cases | 31 October 2026 |
| Transfer Pricing Report (Form 3CEB) | 31 October 2026 |
| Income Tax Return (ITR) – Transfer Pricing Cases | 30 November 2026 |
| ITR-1 & ITR-2 (Non-Audit Cases) | 31 July 2026 |
| ITR-3 & ITR-4 (Non-Audit Business / Profession) | 31 August 2026 |
| Belated Return | 31 December 2026 |
| Revised Return | 31 March 2027 |
The audit report is always due one month before the corresponding return. That is why transfer pricing cases have a 31 October report date against a 30 November return date.
One change catches people out. The non-audit deadline for ITR-3 and ITR-4 has moved permanently to 31 August, from AY 2026-27 onwards, under the Finance Act 2026. Many published calendars still show 31 July for these forms.
These dates stand unless CBDT notifies an extension. Extensions have been granted in recent years where portal or utility issues arose, but they are not something to plan around.
A practical note for partners: your personal return deadline follows your firm’s status. If the firm is audited, your deadline moves to 31 October even if your own affairs are simple. If you are a partner in more than one firm, the later deadline applies.
Section 271B provides for a penalty of 0.5% of total sales, turnover or gross receipts, capped at ₹1.5 lakh.
The figure is calculated on turnover, not on tax payable. A business with ₹8 crore turnover and a nil tax liability still faces the full ₹1.5 lakh cap. That is what makes late audit filing expensive in a way that late return filing is not.
Section 273B allows the penalty to be waived where the taxpayer demonstrates reasonable cause. Grounds that have been accepted in practice include the death or serious illness of the person handling accounts, seizure of books, and genuine unavailability of records for reasons outside the taxpayer’s control. A general shortage of time is not reasonable cause.
| Form | When It Applies | What It Contains |
|---|---|---|
| Form 3CA | Used where the accounts are already required to be audited under another law, such as the Companies Act, 2013 or the LLP Act, 2008. | Tax audit report that refers to the statutory audit already conducted under the applicable law. |
| Form 3CB | Used where the accounts are not required to be audited under any other law, typically for proprietorships, partnership firms and eligible businesses. | Independent tax audit report along with the auditor's opinion on the financial statements. |
| Form 3CD | Mandatory attachment to either Form 3CA or Form 3CB, depending on the applicable audit report. | Detailed Statement of Particulars containing 44 reporting clauses covering tax compliance, deductions, payments, depreciation, related-party transactions and other disclosures. |
Form 3CD is never filed alone. It is the annexure. The choice between 3CA and 3CB turns purely on whether another statute already requires an audit.
After the Chartered Accountant uploads the report, the taxpayer must log in and accept it on the e-filing portal. An uploaded but unaccepted report is not a filed report. This is one of the most common reasons a business believes it has complied and finds out in October that it has not.
CBDT amended Form 3CD through the Income-tax (Eighth Amendment) Rules, 2025, notified as Notification No. 23/2025 dated 28 March 2025 and effective from 1 April 2025. These amendments apply to the audits being conducted now, for FY 2025-26.
The changes that require preparation:
Reporting on amounts payable to micro and small enterprises has been expanded. The auditor must now report interest that is inadmissible under Section 23 of the MSMED Act, 2006, and Clause 26 has been widened for disallowances under Section 43B(h).
Practical effect: if you are a Gurgaon manufacturer or contractor buying from MSME-registered vendors and paying beyond 45 days, that expense is disallowed in the year of accrual and shows up as a reportable item. Pull your MSME vendor list and ageing before the auditor asks.
With buyback proceeds now taxable as dividend in the shareholder’s hands, Form 3CD requires disclosure of the amount received on buyback and the original cost of acquisition of those shares.
A reporting field has been added for income under the cruise ship business presumptive regime introduced by Section 44BBC. Relevant to a narrow set of taxpayers, but it is a live clause.
Clause 28 has been omitted, with the relevant capital gain now reported through other clauses and the return schedules. Auditors carrying forward last year’s working papers should check which clauses have gone before populating the form.
From Tax Year 2026-27, Forms 3CA, 3CB and 3CD are consolidated into a single unified report, Form No. 26, issued under Section 63 of the Income-tax Act, 2025.
The structure is four parts:
Part A – general information and identification of the taxpayer. Part B – tax-specific particulars, organised into trigger-based schedules rather than a flat clause list. Part C – the audit opinion and the auditor’s observations. Part D – auditor certification, with UDIN and Firm Registration Number both mandatory.
Form No. 26 expands reporting from 44 clauses to 55.
The disclosure Gurgaon businesses should read twice
Among the new clauses is a requirement to disclose details of the cloud storage used to maintain books of account, including the IP address and the country in which backup servers are located.
For Gurgaon’s IT services firms, SaaS companies, e-commerce sellers and any business running accounts on a cloud ERP, this is a live data-governance question, not a form-filling exercise. If your books sit on a server whose location your finance team cannot state, that needs resolving during FY 2026-27, not in September 2027.
Two further transitional points. All references in Form No. 26 map exclusively to the Income-tax Act, 2025 and the Income-tax Rules, 2026 – old section numbers such as 44AB are not to be used in it. And Form 26AS is replaced by Form 168, with the annual information statement labelled by Tax Year rather than Assessment Year from Tax Year 2026-27.
Turnover is not simply the figure at the top of your profit and loss account. The method depends on what the business actually does.
| Business Type | Basis for Turnover |
|---|---|
| Trader or Manufacturer | Net sales after deducting sales returns, trade discounts, rebates and price adjustments. |
| Commission Agent or Broker | Only the commission earned is treated as turnover—not the total value of goods or transactions handled. |
| Service Provider | Gross professional fees or service revenue, excluding GST collected purely as an agent of the Government. |
| Speculative Transactions | Aggregate of both favourable and unfavourable differences arising from speculative trades. |
| Futures & Options (F&O) | Aggregate of the absolute profit and absolute loss on settled contracts, plus the premium received on options sold. The gross contract value is not considered turnover. |
| Intraday Equity Trading | Aggregate of the absolute profit and absolute loss from intraday equity transactions. |
| Delivery-Based Share Trading (Held as Business) | Total sale value of shares sold during the financial year. |
The F&O position is the one most often got wrong. Traders who compute turnover on gross contract value arrive at figures in the hundreds of crores and conclude that audit is mandatory when it is not. Turnover is computed on the absolute profit and loss aggregate in line with the ICAI Guidance Note on Tax Audit under Section 44AB (Revised 2025), which remains the authoritative reference for FY 2025-26 audits.
Where a trader deals through multiple brokers, all broker statements must be consolidated before turnover is computed. Assessing each broker account separately produces the wrong result.
The reconciliation stage is where timelines are lost. GST turnover differences, TDS mismatches and unconfirmed loan balances take weeks to resolve, not days. Businesses that begin in July finish comfortably; businesses that begin in September file under pressure and file qualified reports.
PAN, entity constitution documents, partnership deed or LLP agreement Prior year income tax return and tax audit report Trial balance, ledgers, cash book and bank book Bank statements for all accounts, full year Sales and purchase registers with invoices Expense vouchers and supporting documentation GST returns and GST turnover reconciliation TDS returns, challans and Form 26AS AIS and TIS downloads Stock summary and physical verification records Fixed asset register with purchase invoices and dates put to use Loan statements and confirmations for unsecured loans Party confirmations for material debtors and creditors MSME vendor list with payment ageing Related party transaction details Payroll records Details of brought-forward losses and deductions claimed
Gurgaon’s business mix creates a distinct set of audit pressure points.
IT services, SaaS and digital businesses
Export turnover reconciliation, foreign inward remittance documentation and revenue recognition on multi-year contracts. From FY 2026-27, add the cloud storage and backup server disclosure under Form No. 26 – a question worth resolving with your IT team now.
Manufacturing and auto components
The MSMED Act 45-day payment rule and the Section 43B(h) disallowance is the dominant issue in the Manesar and IMT belt. Vendor payment discipline through the year is cheaper than the disallowance at year end.
Real estate, construction and contractors
Cash transaction scrutiny, Section 269SS and 269T compliance on loans and advances, retention money treatment, and work-in-progress valuation.
Traders, distributors and logistics
This is the group most exposed to the Section 63 change from FY 2026-27. High turnover with margins below 6% will trigger audit where none applied before. Model your position before the year closes.
Professionals and consultancies
Reconciliation of gross receipts against Form 26AS and AIS, and the Section 44ADA decision where receipts sit between ₹50 lakh and ₹75 lakh.
₹1 crore of turnover for business, extending to ₹10 crore where cash receipts and cash payments are each within 5% of the respective totals. For professionals, the limit is ₹50 lakh in gross receipts.
The turnover thresholds carry over broadly unchanged into Section 63 of the Income-tax Act, 2025. The significant change is a new trigger: a business in the presumptive category under Section 58(2) that declares profit below 6% or 8% requires an audit even if it never opted into the presumptive scheme.
30 September 2026 for the audit report on Form 3CA/3CB with 3CD. The corresponding income tax return is due 31 October 2026. Transfer pricing cases have 31 October 2026 for the report and 30 November 2026 for the return.
Section 44AB. AY 2026-27 assesses income of FY 2025-26, which fell under the Income-tax Act, 1961. Section 63 of the Income-tax Act, 2025 applies from Tax Year 2026-27 onwards.
Form No. 26 is the single unified tax audit report under Section 63 of the Income-tax Act, 2025, replacing Forms 3CA, 3CB and 3CD. It is structured in Parts A to D, expands reporting from 44 clauses to 55, and applies from Tax Year 2026-27.
It can be. Audit applies below ₹1 crore where profit is declared below the presumptive rate and total income exceeds the basic exemption limit, where the taxpayer has opted out of Section 44AD within the five-year lock-in, or where other specified presumptive provisions are triggered.
Under Section 271B, 0.5% of total sales, turnover or gross receipts, capped at ₹1.5 lakh. The penalty may be waived under Section 273B where reasonable cause is established.
Form 3CA is used where the accounts are already required to be audited under another law, such as a company under the Companies Act. Form 3CB is used where no other law requires an audit. Form 3CD is attached to whichever applies.
Form 3CD currently has 44 clauses. Form No. 26, which replaces it from Tax Year 2026-27, expands this to 55 clauses.
Not automatically. Audit depends on turnover computed as the aggregate of absolute profit and loss on settled contracts - not gross contract value - and on the level of income declared. A loss alone does not create an audit obligation.
A loss does not by itself trigger audit. Turnover, presumptive history and declared income against the deemed rate determine the answer. From FY 2026-27, a low or negative margin in a presumptive-category business will trigger audit under Section 63 where total income exceeds the exemption limit.
Yes. After the Chartered Accountant uploads the report, the taxpayer must accept it through the income tax e-filing portal. An uploaded report that has not been accepted is not treated as filed.
Fees vary with turnover, transaction volume, the condition of the books, the number of bank accounts and GST registrations, inventory complexity, and the number of Form 3CD clauses that are actually in play. A clean set of books at ₹2 crore turnover is a materially different engagement from an unreconciled set at the same turnover. Ask for a fee quote after an applicability review rather than before.