A tax audit is an examination of a taxpayer’s books of account by a Chartered Accountant, required under the income-tax law in certain cases based on turnover or gross receipts.
Who it generally applies to
Broadly, a tax audit may be required where:
- A business’s total sales, turnover, or gross receipts exceed the prescribed threshold for the year (a higher turnover limit applies where cash receipts and cash payments are within the prescribed small proportion of the total); and
- A profession’s gross receipts exceed the prescribed threshold.
The exact thresholds and conditions are set by the income-tax law and have been revised from time to time. Please verify the limits applicable to the relevant year before relying on them.
Position under the Income-tax Act, 2025
With effect from 1 April 2026, the Income-tax Act, 2025 replaces the Income-tax Act, 1961 (see The new Income-tax Act, 2025: what’s changing). The tax-audit requirement continues, but the section references and prescribed forms are now under the new Act, and the new “tax year” terminology applies.
Because section numbering has changed, please refer to the current provisions of the Income-tax Act, 2025 (and the prescribed forms and rules) for the applicable requirement, rather than the earlier section numbers.
Why it matters
A tax audit helps ensure that books of account are properly maintained and that income is computed in accordance with the law, supporting accurate reporting in the income-tax return.
This note is for general information only and does not constitute professional advice. Thresholds, conditions, section references, and forms are governed by the Income-tax Act, 2025 and related rules and may change; please verify the current provisions or seek advice for your specific situation.