Income Tax Audit Report AY 2025-26: Who Needs to File, Deadlines, Penalties & New Changes Explained

Team SKM,

Find out who needs to file an Income Tax Audit Report for AY 2025-26. Learn about turnover limits, due dates, penalties, presumptive taxation rules, and key changes in Form 3CD.

Income Tax Audit Report AY 2025-26: Complete Guide

As the tax filing season approaches, one key question on every taxpayer’s mind is: Who needs to file the Income Tax Audit Report for AY 2025-26? The Income-tax Act mandates certain businesses and professionals to undergo a tax audit under Section 44AB, ensuring transparency and compliance. Missing these deadlines can invite heavy penalties.

Here’s a detailed breakdown of everything you need to know

Who Needs to File Tax Audit Report for AY 2025-26?

The Income Tax Audit Report is mandatory for the following categories:

1. Businesses
   • If turnover/gross receipts exceed ₹1 crore in FY 2024-25, a tax audit is required.
   • If cash transactions are ≤ 5%, the audit threshold increases to ₹10 crore.
2. Professionals
   • Professionals such as doctors, lawyers, consultants, architects, etc., must get audited if gross receipts exceed ₹50 lakh.
3. Presumptive Taxation Scheme (44AD/44ADA/44AE)
   • No audit required if income is declared at prescribed rates.
   • Audit becomes mandatory if profits are declared lower than the scheme rates and total income exceed the basic exemption limit.

Due Dates for AY 2025-26

• Tax Audit Report submission: 31st October 2025 (Extended for AY 2025-26, General due date is 30^th September).
• ITR filing (for audit cases): 31 October 2025

Penalty for Non-Filing

• Under Section 271B, failure to file the tax audit report may attract a penalty of:
  • 0.5% of turnover/gross receipts, subject to a maximum of ₹1,50,000.
• Late or missing audit reports may also render the ITR defective or invalid under Section 139(9).

Key Changes in Tax Audit Report (Form 3CD) for AY 2025-26

Several amendments effective from 1 April 2025 have made reporting more detailed:

• Settlement payments disclosure – Expenses for settlement of legal contraventions must be reported.
• Buy-back of shares – Details of income under Section 2(22)(f) must be shown.
• Expanded MSME reporting – More detailed disclosure of payments made or pending under MSMED Act.
• Obsolete deductions removed – Old clauses (32AC, 32AD, 35AC, 35CCB) no longer apply.
• E-verification via EVC – For individuals/HUFs, electronic verification is now easier.

Challenges Faced by Taxpayers & Auditors

• Delayed release of ITR forms/utilities (Especially ITR-5, 6, and 7 Released in Aug 2025).
• Shortened compliance timeline, leaving limited time for data reconciliation across GST, TDS, and SFT.

Compliance Tips

• Check turnover/receipts early to confirm audit applicability.
• Maintain records of MSME dues, settlements, and digital transactions.
• If using presumptive taxation, avoid declaring lower profits unless prepared for audit.
• Don’t wait until Deadline – plan with your CA or auditor in advance.

Final Word

The Income Tax Audit Report for AY 2025 – 26 is not just a compliance formality but a crucial step to avoid penalties and notices. With new disclosure norms, businesses and professionals must prepare thoroughly. Staying proactive and consulting your tax advisor is the best way to ensure a smooth filing experience.

For expert guidance on Income Tax Audit, please connect with our team of professionals.