Section 63 of the Income-tax Act, 2025 requires a tax audit where business turnover exceeds ₹1 crore, raised to ₹10 crore where cash receipts and cash payments are each within 5%, or where professional gross receipts exceed ₹50 lakh. The specified date is one month before the return due date.
What section 63 does
Section 63 is the tax audit provision — the successor to section 44AB of the Income-tax Act, 1961 — and the new Act gives it the plainest possible heading: Tax Audit. The conditions are set out in a table rather than in running text.
The thresholds are unchanged in substance. A business is audited once turnover exceeds ₹1 crore, but that becomes ₹10 crore where cash receipts and cash payments each stay within 5% of the respective totals. A profession is audited once gross receipts exceed ₹50 lakh.
One number is worth circling. The specified date is defined in sub-section (5)(a) as one month prior to the due date for furnishing the return under section 263(1) — both the audit and the report must be completed by then.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 44AB(a) | Business turnover above ₹1 crore | 63(1) — Table serial 1(a) |
| 44AB(a), proviso | ₹10 crore where cash receipts and payments are within 5% | 63(1) — Table serial 1(b) |
| 44AB(b) | Professional gross receipts above ₹50 lakh | 63(1) — Table serial 1(c) |
| 44AB(e) | Presumptive income declared lower than deemed profits | 63(1) — Table serial 2 |
| 44AB, Explanation (ii) | Specified date one month before the return due date | 63(5)(a) |
| 44AB, second proviso | Audit under another law is sufficient compliance | 63(4) |
Section 63 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
Sub-section (1) — the audit trigger, in a table
Every person carrying on business or profession who fulfils any condition in column B of the table must get the accounts of the tax year audited by an accountant, before the specified date. The table is reproduced below from the Act as enacted.
Serial 1(a) and (b) — the ₹1 crore and ₹10 crore business limits
A person carrying on business is audited if total sales, turnover or gross receipts exceed ₹1 crore. That figure is replaced by ₹10 crore where two conditions are both met: aggregate receipts in cash do not exceed 5% of the total amounts received, and aggregate payments in cash do not exceed 5% of total payments. Both tests must pass — failing either brings you back to ₹1 crore.
Serial 1(c) — the ₹50 lakh profession limit
A person carrying on a profession is audited if gross receipts in the profession exceed ₹50 lakh in any tax year. There is no cash-based relaxation for professionals.
Serial 2 — declaring below the presumptive rate
Audit is also required where the person carries on a business or profession referred to in section 58(2) or section 61(2) (Table serial numbers 4 and 5) and the profits claimed are lower than the deemed profits under those sections.
Sub-section (2) — the presumptive shelter
The section does not apply where the profits declared are as per section 58(2) or section 61(2). Declaring at or above the presumptive rate therefore keeps you out of audit, whatever the turnover — subject to the limits built into section 58 itself.
Sub-section (3) — furnishing the report
The assessee must furnish, by the specified date, the audit report in the prescribed form, duly signed and verified by the accountant, setting out the prescribed particulars.
Sub-section (4) — where another law already requires an audit
If a person is required by another law to get accounts audited, it is sufficient compliance if they (a) get the accounts audited under that law before the specified date, and (b) furnish that report by the specified date along with the accountant's report in the prescribed form. A company audited under the Companies Act still files the tax audit report.
Sub-section (5) — two definitions that matter
Specified date means the date one month prior to the due date for furnishing the return of income under section 263(1). And a payment or receipt by a cheque or bank draft that is not account payee is deemed to be in cash — which directly affects the 5% test for the ₹10 crore limit.
The section 63 audit conditions, as enacted
This is the table in section 63(1) of the Income-tax Act, 2025.
| 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) … |
| 2. | If the person is carrying on business or profession, referred to in section 58(2) or 61(2) (Table: Sl. No. 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. |
Worked example
Four businesses in tax year 2026-27. Assume the return due date under section 263(1) is 31 October 2027, so the specified date is 30 September 2027.
| Business | Turnover | Cash receipts / payments | Audit required? |
|---|---|---|---|
| Trading firm A | ₹4 crore | Cash receipts 2%, cash payments 3% | No — within the ₹10 crore limit, both cash tests passed |
| Trading firm B | ₹4 crore | Cash receipts 2%, cash payments 9% | Yes — the payment test failed, so the ₹1 crore limit applies |
| Consultancy practice | Gross receipts ₹62 lakh | All banked | Yes — above the ₹50 lakh professional limit; no cash relaxation |
| Retailer declaring 5% profit against a presumptive rate of 6% | ₹90 lakh | — | Yes — serial 2, income claimed below the deemed profits |
Firm B is the instructive case. Its cash receipts were well within 5%, but a single test failure on payments pushes it from the ₹10 crore limit down to ₹1 crore, and it is audited. Note also sub-section (5)(b): a bearer or crossed-but-not-account-payee cheque counts as cash for this test.
Compliance checklist and due dates
- Compute both cash ratios separately — receipts and payments — and confirm each is within 5% before relying on the ₹10 crore limit.
- Treat non-account-payee cheques and drafts as cash under sub-section (5)(b) when computing those ratios.
- Diarise the specified date: one month before the section 263(1) due date, not the return date itself.
- Where another law requires an audit, complete it before the specified date and file both reports.
- If declaring below the presumptive rate under section 58 or 61(2), plan for audit under serial 2 and books under section 62.
- Remember the penalty for failure to get accounts audited is section 446 (the successor to section 271B).
Common mistakes
- Relying on the ₹10 crore limit after passing only the receipts test. Both tests must pass.
- Counting a crossed cheque that is not account payee as banked. Sub-section (5)(b) deems it cash.
- Applying a cash-based relaxation to a profession. The ₹50 lakh limit in serial 1(c) has none.
- Treating the statutory audit under the Companies Act as complete compliance without filing the accountant's report — sub-section (4)(b) requires both.
- Missing the specified date because it was confused with the return filing due date.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.