Tax Audit Fees explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Tax audit fees are charged on the work involved rather than on turnover, and may not be contingent on findings or results. The Rs 250 crore statutory-auditor fee cap does not restrict tax audit fees, because tax audit is an audit under another statute.
From the ICAI Guidance Note on Tax Audit (Revised 2026), the concluding edition under the Income-tax Act, 1961. The fee restrictions are ethical rules under the Chartered Accountants Act, 1949 and continue to apply to the audit under section 63 of the Income-tax Act, 2025.
Contingent fees are prohibited
Paragraph 9.15: under the Code of Ethics, no tax auditor shall charge or offer to charge, accept or offer to accept, professional fees by way of percentage of profits, or which are contingent upon findings or results of such employment, except as permitted under any regulation made under the Chartered Accountants Act.
The Guidance Note points to Clause (10) of Part I of the First Schedule to the Chartered Accountants Act and the commentary at page 183 of the Code of Ethics (Volume II — 2020 Edition).
The Regulation 192 exception
Certain exceptions are made in Regulation 192. As per Regulation 192(b), in the case of an auditor of a co-operative society, the fees may be based on a percentage of the paid-up capital, the working capital, or the gross or net income or profits.
A fee expressed as a share of a refund obtained, of a disallowance avoided, or of tax saved is contingent on results and is prohibited. So is a fee that varies with whether the report is clean or qualified. A fee that varies with the hours and complexity of the work is not contingent, and is precisely what the Guidance Note recommends.
The basis on which tax audit fees should be set
Paragraph 9.34 is unusually direct about why turnover is the wrong basis. The Institute has recommended fees on the basis of time devoted by a chartered accountant and his assistants, and tax audit fees can be charged on the basis of the work involved in the assignment. The reasoning:
- an assessee with a turnover of Rs 1 crore in a trading activity may have fewer transactions than an assessee with the same turnover in a manufacturing activity; and
- transactions in a wholesale business will be fewer than in a retail business.
The revised minimum recommended scale of fees recommended by the Committee for Members in Practice is at Appendix X.
Paragraph 9.35 adds the professional expectation: chartered accountants should charge reasonable fees depending on the responsibility involved under the revised forms, taking into consideration the work involved, which has increased considerably consequent to the revision of the forms. Members of the profession should maintain reasonable standards of professional fees.
The Rs 250 crore fee cap — and why tax audit is outside it
Paragraph 9.19 records the rule from Chapter VI, "Appointment as Statutory auditor", of the Guidelines on Ethical Issues, 2026, applicable with effect from 1 April 2026 (Appendix VII). A member in practice is deemed guilty of professional misconduct if he:
- accepts appointment as statutory auditor of a Public Sector Undertaking, Government Company, Listed Company or other public company having turnover of Rs 250 crore or more in a year; and
- accepts any other work, assignment or service in regard to the same undertaking or company on a remuneration which in total exceeds the fee payable for carrying out the statutory audit of the same undertaking or company.
Paragraph 9.20: the restriction applies to fees for other work payable to the statutory auditors and their associate concerns put together.
What "other work" excludes
Paragraph 9.21: "other work(s)", "service(s)" or "assignment(s)" includes Management Consultancy and all other professional services permitted by the Council under section 2(2)(iv) of the Chartered Accountants Act, 1949, but shall not include:
- (i) audit under any other statute;
- (ii) certification work required to be done by the statutory auditors; and
- (iii) any representation before an authority.
The conclusion for tax audit
Paragraph 9.22: since the obligation for tax audit is specified in section 44AB of the Income-tax Act, 1961, it will be considered as an audit under any other statute for the purpose of this Guideline, and the above restriction shall not apply in respect of tax audit fees.
Worked example
A firm is the statutory auditor of a listed company with turnover of Rs 900 crore. Statutory audit fee: Rs 40,00,000.
| Additional engagement | Fee | Counts against the Rs 40,00,000 cap? |
|---|---|---|
| Tax audit under section 44AB | Rs 9,00,000 | No — audit under another statute (paragraph 9.22) |
| Certification work required of the statutory auditor | Rs 3,50,000 | No — expressly excluded |
| Representation before an appellate authority | Rs 6,00,000 | No — expressly excluded |
| Management consultancy on a systems project, by an associate concern | Rs 34,00,000 | Yes |
| Other permitted professional services | Rs 9,00,000 | Yes |
Total counting against the cap = Rs 43,00,000, which exceeds the Rs 40,00,000 statutory audit fee. The breach comes entirely from the consultancy work; the tax audit fees, certification and representation are outside the computation altogether.
Audit checklist
- Fix the fee on time and work involved, benchmarked against Appendix X.
- State the remuneration in the appointment letter, as paragraph 9.23 requires.
- Never accept a fee expressed as a percentage of profits, refunds or tax saved.
- Apply the Regulation 192(b) exception only to a co-operative society audit.
- Where the firm is a statutory auditor of a Rs 250 crore-plus company, run the fee cap computation including associate concerns.
- Exclude tax audit fees, certification and representation from that computation.
- Revisit the fee where the reporting burden of the revised forms has grown.
Common mistakes
- Quoting a fee as a percentage of turnover and treating that as a professional standard.
- Including tax audit fees in the Rs 250 crore fee cap computation and refusing the assignment.
- Ignoring associate concerns' fees when testing the cap.
- Accepting a success-linked fee for a tax audit.
- Leaving the fee out of the appointment letter.