Tax audit
Audit and assurance
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Year-end
A tax audit examines the accounts and reports the particulars required by income-tax law. TheTaxCo determines applicability, performs the audit through the eligible appointed accountant, completes report filing and follows up on reporting queries. The signed report follows the appointed accountant’s examination and professional judgement.
The report is separate from the annual income-tax return and from an audit required under another law. Their figures and disclosures must still reconcile, so the audit timetable is coordinated with the accounts close and return preparation.
Which period and report apply?
For FY 2025–26, reported as AY 2026–27, the earlier framework uses Forms 3CA or 3CB with Form 3CD, as applicable. For Tax Year 2026–27, the new Rules prescribe Form 26, combining the tax-audit report and particulars. Income Tax Department form transition guidance.
The applicable form follows the audited period, not the date on which an accountant begins work. An earlier-period audit cannot be moved to the new form solely because the assignment takes place after 01-04-2026.
Applicability needs more than one turnover figure
Under section 63 of the new Act, the ordinary business threshold is turnover or gross receipts exceeding ₹1 crore. The higher ₹10 crore threshold applies only where both cash receipts and cash payments do not exceed 5% of their respective totals. Non-account-payee cheques or drafts are treated as cash for this test. Professional gross receipts have a separate ₹50 lakh threshold, subject to the applicable presumptive provisions and exclusions. Income-tax Act, 2025, section 63.
Eligible presumptive treatment and lower-than-presumptive declarations need a separate review. The Act provides exclusions where income is declared in accordance with the specified presumptive provisions, so the professional threshold should not be read without that qualification. We document the taxpayer category, nature of income and applicable conditions before concluding that an audit is required or unnecessary.
The cash test uses the statutory receipts and payments base, not merely cash sales divided by sales. A provisional estimate during the year can flag exposure, but final applicability requires the completed records.
The audit work and management’s records
The audit begins with final books, financial statements, prior reports and a schedule of changes in the business. We reconcile the turnover used for reporting to the sales ledger, GST returns, credit notes and year-end entries. Timing or classification differences are explained rather than forced into agreement.
The prescribed reporting work draws on fixed assets and depreciation, borrowings, related-party transactions, expenses requiring tax treatment, withholding records and other relevant particulars. Material entries are traced to evidence. Management supplies explanations, records and confirmations; the accountant assesses whether they are sufficient for reporting.
Audit queries are grouped by the person able to answer them. If a book adjustment is approved, the changed amount is carried through the financial statements, audit schedules and return handover. Unsupported matters are addressed in accordance with the reporting requirements rather than removed from the query list because the deadline is close.
A statutory audit can provide useful evidence, but the income-tax particulars and applicability still require separate attention. We assess appointment and professional requirements before accepting responsibility for the tax-audit report.
Report, signing and filing responsibilities
Our team completes the audit, prescribed report and authorised filing, coordinates the related accounts and return work, and follows up on report-processing queries. The engagement identifies the appointed accountant, periods and respective responsibilities. Where related accounting work is needed, it is arranged consistently with the auditor’s independence and applicable professional requirements. Management remains responsible for the accounts and facts it supplies. The accountant signs the report after completing the necessary examination and determines any observations or qualifications.
You receive the signed report when complete, supporting schedules, the turnover and other material reconciliations, and the matters affecting the return. The filing record and acknowledgement are retained after the authorised process. A draft schedule is not presented as a completed audit report.
The ordinary Tax Year 2026–27 report date is 30-09-2027. Section 63 defines the specified date by reference to one month before the applicable return deadline, so the transfer-pricing category needs its corresponding timetable. An applicable extension is considered separately. Section 63 and amended section 263.
Preparing for the audit
We agree an earlier books-freeze and query-resolution date after reviewing the records. We identify incomplete records early and organise the accounting work needed to make them ready for examination, preserving the auditor’s independent assessment. The timetable reflects transaction complexity, reporting requirements and the evidence still outstanding.
For Tax Year 2026–27, section 428(c) prescribes a fee of ₹75,000 for the specified audit/report default continuing up to one month and ₹1,50,000 thereafter. Section 428 as amended. A timely report still needs adequate evidence. The timetable therefore includes management responses and the accountant’s final review rather than only the date of upload.
Questions before appointing the auditor
Is ₹10 crore the limit for every business? No. Both cash-percentage conditions must be satisfied, and other applicable triggers must also be examined.
We already have a statutory audit. Is another report necessary? Possibly. The income-tax audit test and prescribed particulars are assessed separately, taking the other audit into account as the law provides.
Can applicability be checked before year-end? Yes, provisionally. Monitoring turnover and cash proportions helps plan the work, with the conclusion finalised from completed-year records.
Can you promise an unqualified report? No. The report reflects the evidence and applicable professional reporting requirements.
Related services
Email TheTaxCo, message us on WhatsApp or book a call. Share the period, business or profession, approximate receipts, cash-receipt and cash-payment proportions, and the status of the accounts and existing auditor appointment.