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Income Tax

Section 44AB Is Now Section 63: What Practitioners Need to Confirm Before the 30 September Tax Audit Deadline

Published 23 Aug 2026· Updated 23 Aug 2026· 6 min read

Practical Compliance Guide · Income Tax · Tax Audit · KNOWLEDGE/EXPLAINER (not tied to a new development today)

Executive Summary

The familiar Section 44AB tax audit provision does not disappear under the Income-tax Act, 2025 — it is renumbered as Section 63. Forms 3CA, 3CB and 3CD remain the operative audit forms for FY 2025-26 (AY 2026-27) — the year now falling due. A consolidated Form No. 26, which restructures the audit report into Parts A–D and is intended to eventually replace Forms 3CA/3CB/3CD, is on record on the Income Tax Department’s own website as applicable from tax year 2026-27 onward (i.e., FY 2026-27, the year beginning 1 April 2026) — a future filing season, not the one now approaching. For FY 2025-26 (AY 2026-27), the basic business turnover threshold remains ₹1 crore, rising to an enhanced ₹10 crore where both aggregate cash receipts and aggregate cash payments each stay within 5% of total receipts/payments for the year; the professional gross-receipts threshold remains a flat ₹50 lakh, with no enhanced-limit concession. The tax audit report for FY 2025-26 is due 30 September 2026. A perennial audit-season question — whether GST collected and remitted on behalf of the Government forms part of “turnover” for this threshold test — remains governed by the settled, though not judicially unanimous, professional position that Section 145A’s inclusive definition is scoped only to computing taxable income under “Profits and Gains of Business or Profession,” and does not extend to the Section 44AB/63 turnover test itself.

Why It Matters

Every practitioner’s audit-season workflow starts with the applicability question, and getting it wrong carries real cost on both sides: unnecessarily auditing a client who did not cross the threshold wastes fees and time, while missing that a client did cross it exposes them to a Section 271B penalty (0.5% of turnover/gross receipts, capped at ₹1,50,000) for failure to get accounts audited and furnish the report in time. With the Income-tax Act, 2025 now in force for AY 2026-27 and the accompanying renumbering exercise still unfamiliar to many practices, this is also the first audit season where firms must consciously map their internal checklists, engagement letters, and audit-planning templates from “Section 44AB” language to “Section 63” — a purely nomenclature change on the surface, but one that can create confusion in client communication and in cross-referencing older working papers and precedents.

Key Takeaways

  • Section 44AB of the Income-tax Act, 1961 corresponds to Section 63 of the Income-tax Act, 2025 — the substantive audit obligation is carried forward, not altered, by the renumbering.
  • Forms 3CA, 3CB and 3CD remain the operative audit forms for the FY 2025-26 (AY 2026-27) tax audit now falling due; the consolidated Form No. 26 replacing them is applicable only from tax year 2026-27 onward (FY 2026-27), per the Income Tax Department’s own published material — not for this year’s filing.
  • Business turnover threshold: ₹1 crore generally, enhanced to ₹10 crore only where both cash receipts and cash payments each remain within 5% of total receipts/payments for the year — if either leg fails the 5% test, the threshold reverts to ₹1 crore.
  • Professional gross-receipts threshold: a flat ₹50 lakh, with no cash-transaction-based enhancement available to professionals.
  • The tax audit report for FY 2025-26 (AY 2026-27) is due 30 September 2026.
  • GST collected and remitted as an agent of the Government is, on settled professional consensus, excluded from “turnover” for the Section 44AB/63 threshold test — because Section 145A’s inclusive definition of sale/purchase value is expressly scoped to income computation under the business-income head, not to threshold determination — though the point has not been the subject of a specific CBDT circular and can still be raised by an assessing authority in individual cases.

Practical Implications

Before finalising the applicability call for any client this audit season, run the threshold test twice: once on turnover/gross receipts excluding GST (the position most practitioners currently follow) and once including it, to identify clients sitting close enough to the ₹1 crore, ₹10 crore, or ₹50 lakh lines that the GST-inclusion question could change the outcome. For clients relying on the enhanced ₹10 crore threshold, verify the 5% cash test on both the receipts side and the payments side independently — a common error is checking only one leg and assuming the enhanced threshold automatically applies. Update engagement letters, audit planning memos, and internal checklists to reference Section 63 of the Income-tax Act, 2025 alongside the legacy Section 44AB citation, so that client-facing communication and cross-references to older files remain unambiguous during this transition period.

Action Checklist

  • Re-run the turnover/gross-receipts threshold computation for every audit client for FY 2025-26, testing both the GST-excluded and GST-included positions where the client is within striking distance of a threshold.
  • For clients claiming the enhanced ₹10 crore business threshold, independently verify the 5% cash-receipts test and the 5% cash-payments test — both must be satisfied.
  • Confirm no client professional has been incorrectly given the benefit of an enhanced threshold — Section 44AB/63 does not extend the ₹10 crore concession to professional gross receipts.
  • Update audit engagement letters and internal templates to cite Section 63, Income-tax Act, 2025 (with the Section 44AB legacy reference retained for continuity) ahead of the 30 September 2026 filing deadline.
  • Diarise 30 September 2026 as the Forms 3CA/3CB and 3CD filing deadline for FY 2025-26 (the consolidated Form No. 26 does not apply to this year’s filing), and build in a buffer for clients whose GST-inclusion status is still being finalised.

Relevant Sections / Rules / Notifications

  • Section 44AB, Income-tax Act, 1961 (tax audit provision, applicable through AY 2026-27 filings under the transition framework)
  • Section 63, Income-tax Act, 2025 (renumbered tax audit provision)
  • Section 145A, Income-tax Act, 1961 (inclusive definition of value of sale/purchase/inventory — scoped to computation of business income, not to Section 44AB/63 threshold determination, per settled professional consensus)
  • Section 271B, Income-tax Act, 1961 (penalty for failure to get accounts audited / furnish audit report in time — 0.5% of turnover/gross receipts, capped at ₹1,50,000)
  • Rule 6G, Income-tax Rules, 1962 (Forms 3CA, 3CB, 3CD)
  • Form No. 26, Income Tax Department (consolidated audit report replacing Forms 3CA/3CB/3CD, applicable from tax year 2026-27 onward per material published at incometaxindia.gov.in — not applicable to the FY 2025-26 audit now falling due)

FAQs

Q: Has the tax audit turnover threshold itself changed for AY 2026-27?
A: No — the ₹1 crore general threshold, the ₹10 crore enhanced threshold (subject to the 5% cash test on both receipts and payments), and the ₹50 lakh professional threshold are unchanged from the immediately preceding year. What has changed is the section number under the Income-tax Act, 2025 (now Section 63); the consolidated Form No. 26 is a separate, prospective change that applies only from tax year 2026-27 (FY 2026-27) onward, not to the audit now falling due for FY 2025-26.

Q: Will I need to use Form No. 26 for the tax audit report due on 30 September 2026?
A: No — based on material published on the Income Tax Department’s own website, Form No. 26 becomes applicable for tax year 2026-27 onward (FY 2026-27, the year beginning 1 April 2026). The audit report due 30 September 2026, for FY 2025-26, continues to use Forms 3CA, 3CB and 3CD.

Q: If a client narrowly qualifies for the enhanced ₹10 crore threshold based on receipts but fails the 5% test on the payments side, does the enhanced threshold still apply?
A: No — both the cash-receipts test and the cash-payments test must independently be satisfied. Failing either test reverts the applicable threshold to ₹1 crore.

Q: Is the GST-exclusion-from-turnover position backed by a specific CBDT circular?
A: Not currently on record. It rests on the settled professional reading of Section 145A’s limited scope (confined to computing business income, not to the Section 44AB/63 threshold test) rather than a dedicated circular — practitioners should treat it as the prevailing consensus position, not an unchallengeable statutory certainty, and document the basis for the position taken in any borderline case.

Internal Links

  • Compliance Alert — Week of 23–29 August 2026
  • Income Tax / Tax Audit hub

Related Articles

None this cycle — no companion case-law article was verified to Finoscape’s evidentiary standard this cycle; this depth piece stands alone.

Reading time: 5 minutes

Prepared by Finoscape Editorial Team — contact@finoscape.com. This article is for general informational purposes and does not constitute legal or tax advice. Tax audit applicability and turnover computation should be independently assessed with a qualified professional on the specific facts of each client.

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