Chapter IV - Computation of Total Income
Section 63
Section 63: tax audit
Section 63 is the Income-tax Act, 2025's tax audit provision, requiring certain businesses and professionals to get their accounts audited by an accountant before a specified date and to furnish the audit report. It is the successor to Section 44AB of the old Act, and its thresholds work together with the books-of-account rule in Section 62 and the presumptive taxation rules in Sections 58 and 61.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(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.
| Sl. No. | Conditions for getting books of account audited |
|---|---|
| 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. |
| 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 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 may be prescribed. (5) For the purposes of this section,— (a) “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). (b) the payment or receipt, as the case may be, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the payment or receipt, as the case may be, in cash.
Introduction
A tax audit is triggered by the table's business turnover, professional receipts or particular presumptive-profit situations. The accountant's report must be obtained by the specified date.
Key takeaways
Tax audit trigger
A business or professional taxpayer meeting a condition in this section's table must have the tax-year accounts audited by an accountant before the specified date.
Turnover and presumptive cases
The table includes business turnover, professional receipts and certain below-presumptive-profit situations; cash transaction levels can change the business-turnover threshold.
Who must get a tax audit
| Category | Audit trigger |
|---|---|
| Business (general rule) | Total sales, turnover or gross receipts exceed ₹1 crore in the tax year |
| Business, mostly digital transactions | The ₹1 crore threshold is raised to ₹10 crore if cash receipts (including sales/turnover/gross receipts) do not exceed 5% of the total, and cash payments (including expenditure) also do not exceed 5% of the total |
| Profession | Gross receipts exceed ₹50 lakh in the tax year |
| Presumptive-scheme assessee claiming lower profit | Person carrying on business/profession under Section 58(2) or Section 61(2) (Table Sl. Nos. 4 and 5), where profits are claimed to be lower than the deemed profits under those sections |
When Section 63 does not apply
Section 63(2) exempts an assessee from this section's audit requirement where the declared profits and gains of the business or profession are exactly as computed under the presumptive rules of Section 58(2) or Section 61(2).
Filing the audit report and overlap with audits under other laws
Section 63(3) requires the audit report to be furnished by the "specified date," in the prescribed form, duly signed and verified by the accountant, setting out the prescribed particulars.
Section 63(4) allows a person who is required under some other law to get accounts audited to treat that as sufficient compliance with Section 63, provided the accounts of the relevant business/profession are audited under that other law before the specified date, and the audit report is furnished along with the accountant's report in the prescribed form by that date.
Key definitions
- "Specified date" means the date one month prior to the due date for furnishing the return of income under Section 263(1).
- A cheque or bank draft that is not "account payee" is deemed to be a cash payment or receipt, as the case may be, for testing the 5% thresholds.
Step-by-step flow for applying Section 63
- 1
Are profits declared as per Section 58(2) or 61(2)?
- Yes: Section 63 does not apply (Section 63(2)).
- No: Go to the next step.
- 2
Business or profession?
- Profession: Audit needed if gross receipts exceed ₹50 lakh.
- Business: Go to the next step.
- 3
Are both cash receipts and cash payments within 5% of the respective totals?
- Yes: Audit threshold is ₹10 crore of turnover.
- No: Audit threshold is ₹1 crore of turnover.
- 4
Is a presumptive-scheme assessee claiming profits lower than the deemed profits?
- Yes: Audit is required regardless of turnover.
- 5
Get the audit done and furnish the report by the specified date
The report must be in the prescribed form, signed and verified by an accountant. If another law already requires an audit, that audit plus the prescribed report can satisfy Section 63.
Practical checklist
Do
- Calculate turnover or gross receipts using the applicable tax-year figures and test the matching table row.
- For the higher business-turnover threshold, measure the specified cash receipt and payment percentages.
- Arrange the accountant's audit and prescribed report before the statutory date.
Avoid
- Do not apply the higher cash-light threshold without checking both sides of the cash condition.
- Do not assume a presumptive claim always removes tax-audit duties.
Illustrative example
Worked example: a digital-first distributor
Hypothetical facts (illustration only, not a real taxpayer): A partnership firm has turnover of ₹6 crore. Cash receipts are 2% of total receipts and cash payments are 3% of total payments. It does not opt for presumptive taxation.
Presumptive check
Profits are not declared under Section 58(2), so Section 63(2) does not exclude it.
Cash tests
Both cash receipts and cash payments are within 5%, so the ₹10 crore threshold applies.
Turnover
₹6 crore does not exceed ₹10 crore.
Outcome
- No tax audit is required under Section 63 for this tax year.
- If cash payments rose to 6% of total payments, the threshold would fall to ₹1 crore and an audit would be required.
Glossary
- Tax audit
- An accountant's audit of tax-year business or professional accounts required by Section 63.
- Specified date
- The statutory deadline by which the covered taxpayer must obtain the audit.
Frequently asked questions
What is the turnover limit for a compulsory tax audit under Section 63?
₹1 crore for a business, raised to ₹10 crore if both cash receipts and cash payments each stay within 5% of the total. For a profession, the limit is ₹50 lakh in gross receipts.
Do presumptive-taxation assessees need a tax audit?
Not if they declare income exactly as per the presumptive computation under Section 58(2) or Section 61(2) - Section 63(2) exempts them. But if they claim lower actual profit than the deemed figure, an audit is required under Section 63(1) Table Sl. No. 2.
What is the "specified date" for furnishing the tax audit report?
One month before the due date for filing the return of income under Section 263(1), as defined in Section 63(5)(a).
Need help applying this provision to your situation?
Get your tax audit under Section 63 completedLast updated 10 October 2026