Section 63 of Income Tax Act, 2025 (formerly Section 44AB of Income Tax Act, 1961) read with Rule 6G and ICAI Auditing Standards

Tax Audit under Section 63 (formerly Section 44AB)

Statutory audit of financial statements, rigorous clause-by-clause verification under Form 3CD (44 clauses), and CA certification in Form 3CA/3CB in strict compliance with Section 63 of the Income-tax Act, 2025 (formerly Section 44AB of the Income-tax Act, 1961) with ICAI UDIN generation. Tax audits for financial years up to 2025-26 are conducted under Section 44AB of the Income-tax Act, 1961 in Forms 3CA/3CB/3CD; Section 63 of the Income-tax Act, 2025 applies from tax year 2026-27.

CA Due Diligence

Official Portal Filing

State Stamp Advisory

Tax Audit under Section 63 (formerly Section 44AB) Statutory Advisory

Statutory Filing

MCA & Tax Practice

Relevant RegulatorCentral Board of Direct Taxes (CBDT), Ministry of Finance, Govt of India

Income Tax e-Filing Official Portal

The official Government of India portal for uploading Form 3CA/3CB audit reports with Form 3CD annexures, generating CA digital signatures, and securing client electronic acceptance.

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STATUTORY OVERVIEW

Statutory Tax Audit & Form 3CD Certification

Under Section 63 of the Income-tax Act, 2025 (formerly Section 44AB of the Income-tax Act, 1961), specified corporate enterprises, firms, LLPs, and professionals whose turnover exceeds statutory thresholds are mandated to have their books of accounts audited by an independent Chartered Accountant. The objective is to verify that financial statements accurately reflect taxable income, ensure statutory deductions are computed in accordance with the law, and disclose specific particulars under Form 3CD. Our audit practice conducts rigorous examinations adhering to ICAI Auditing and Assurance Standards (AAS) and Guidance Notes on Tax Audit issued by ICAI.

Statutory & Practice Summary • At-A-Glance

ICAI UDIN Authentication Mandate

Governing Framework

Section 63 of Income Tax Act, 2025 (formerly Section 44AB of Income Tax Act, 1961) read with Rule 6G and ICAI Auditing Standards

Regulatory Authority

Central Board of Direct Taxes (CBDT), Ministry of Finance, Govt of India & The Institute of Chartered Accountants of India (ICAI)

Professional Assurance

Chartered Accountants Attestation under ICAI Standards & Code of Ethics

DOCUMENTATION MATRIX

Mandatory Documents Checklist

Self-attested scanned copies required

1. Promoters / Partners / Directors KYC

✓PAN Card and Aadhaar Card / Passport of Partners, Proprietor, or Directors
✓Valid Digital Signature Certificate (Class 3 DSC) of the Signing Partner / Director
✓Active e-Filing Login Credentials and authorized CA assignment on the e-filing portal

2. Registered Office & Premises Proof

✓Registered Business Address utility bills / rental agreements for multi-location operations
✓Bank Account Statements of all active current and overdraft accounts for the full financial year

3. Specific Statutory Declarations & Enclosures

•Complete Trial Balance, Balance Sheet, Profit & Loss Account, and General Ledgers
•Fixed Assets Register with acquisition invoices and depreciation schedules under both Companies Act and IT Act
•Month-wise GSTR-1, GSTR-3B, and GSTR-9/9C reconciliation with book turnover
•Quarterly TDS Returns (Forms 24Q, 26Q), payment challans, and TRACES 26AS/AIS reconciliation
•Year-end Trade Payables aging schedule specifically identifying MSME vendor balances [formerly Section 43B(h)]
•Quantitative details of raw materials and finished goods / Physical Stock Verification certificates

PROCEDURAL ROADMAP

Step-by-Step Filing & Approval Process

Structured execution roadmap managed by our Chartered Accountants from pre-filing due diligence to certificate allotment.

01Week 1

Threshold & Scope Determination

Evaluating gross receipts, digital transaction ratios (95% banking rule for ₹10 Cr limit), presumptive opting-out provisions, and executing ICAI engagement letters.

02Week 2 - 3

Substantive Ledger & 44-Clause Verification

Vouching transactions across all 44 clauses of Form 3CD, verifying depreciation blocks, Section 40A(3) cash ceilings, MSME 43B(h) compliance, and statutory dues.

03Week 4

Draft Audit Report & UDIN Issuance

Compiling Form 3CA (for corporate entities) or Form 3CB (non-corporate entities) along with Form 3CD, generating mandatory Unique Document Identification Number (UDIN).

04Final Week

Electronic Portal Filing & Client Acceptance

Uploading JSON schema on the income tax e-filing portal under the CA login, followed by client DSC verification and acceptance prior to the statutory deadline.

Statutory Audit Thresholds & Applicability Framework

The applicability of tax audit depends upon the nature of business operations, transaction modes, and presumptive tax elections made in prior assessment years. Taxpayers must evaluate their financial metrics under Section 63 of the Income-tax Act, 2025 (formerly Section 44AB of the Income-tax Act, 1961).

Form 3CA - Statutory Report

Corporate & Regulated Entities

Audit report prescribed for persons who are required by or under any other law to get their accounts audited (such as Companies under the Companies Act, 2013).

Form 3CB - Standalone Report

Firms, LLPs & Proprietary

Audit report prescribed for persons who are not required by or under any other law to get their accounts audited, certifying true and fair view of financial statements.

Business Turnover Exceeding ₹1 Crore: Applicable where cash transactions (receipts or payments) exceed 5% of aggregate turnover

Enhanced ₹10 Crore Threshold: Applicable where at least 95% of all business receipts and payments are conducted through banking channels

Professionals with Gross Receipts Exceeding ₹50 Lakhs (or ₹75 Lakhs under presumptive provisions where cash receipts do not exceed 5%)

Presumptive Tax Interplay: Taxpayers under the corresponding section of the Income-tax Act, 2025 (formerly Section 44AD of the Income-tax Act, 1961) declaring profits lower than deemed percentages whose income exceeds basic exemption limits

Presumptive Professionals under the corresponding section of the Income-tax Act, 2025 (formerly Section 44ADA of the Income-tax Act, 1961) claiming profits lower than 50% with income above the maximum amount not chargeable to tax

Core Verification Areas under Form 3CD

Form 3CD contains 44 comprehensive clauses requiring extensive testing of ledger transactions, voucher verification, statutory payment reconciliations, and compliance verifications. A thorough tax audit ensures that potential tax exposures are identified and accurately documented in accordance with statutory provisions.

Depreciation Verification (Clause 18): Computation of allowable depreciation under the corresponding section of the Income-tax Act, 2025 (formerly Section 32 of the Income-tax Act, 1961), block additions, and block-wise rates

Disallowances for Non-Deduction of TDS (Clause 21): 30% disallowance for resident TDS defaults and 100% for non-resident defaults [formerly Section 40(a)(ia) and 40(a)(i)]

Cash Transactions Ceiling (Clause 21): Payments exceeding ₹10,000 made in cash for business expenditure subject to disallowance [formerly Section 40A(3)]

Statutory Dues & Employee Contributions (Clause 20): Verification of timely deposit of employee PF/ESI contributions prior to statutory due dates [formerly Section 36(1)(va)]

MSME Payment Compliance (Clause 22): Clause-by-clause scrutiny of delayed payments to Micro and Small enterprises [formerly Section 43B(h)]

Loans & Deposits Scrutiny (Clause 31): Verification of compliance with limits on acceptance and repayment of loans and deposits [formerly Sections 269SS and 269T]

Audit Methodology & ICAI Compliance Standards

Practice Scope & Statutory Guidance

Our audit practice implements structured risk-based audit sampling and internal control evaluations. Tax audit reports are generated through automated working papers, ensuring full reconciliations between audited balance sheets, GST returns (Form GSTR-9C), and tax audit schedules. Every audit report carries a system-generated Unique Document Identification Number (UDIN) issued under ICAI regulations, confirming the authenticity of the certification.

STATUTORY MATRIX

Statutory Provisions & Regulatory Comparative Matrix

Comparative analysis of governing sections under the new framework alongside legacy statutory references.

Taxpayer Category / Business Type	Governing Section: New Act 2025 (Old Act 1961)	Audit Threshold & Mandatory Reporting Format
Business with Over 5% Cash Transactions	Section 63 of Income Tax Act, 2025 (formerly Section 44AB(a) of Income Tax Act, 1961)	Turnover exceeding ₹1 Crore. Form 3CA/3CD (Companies) or Form 3CB/3CD (Firms/Proprietors).
Business with ≥ 95% Digital / Banking Transactions	Section 63 of Income Tax Act, 2025 (formerly Section 44AB(a) Proviso of Income Tax Act, 1961)	Enhanced threshold of ₹10 Crores. Cash receipts & cash payments must both remain below 5%.
Professionals (Doctors, CAs, Engineers, Lawyers)	Section 63 of Income Tax Act, 2025 (formerly Section 44AB(b) of Income Tax Act, 1961)	Gross receipts exceeding ₹50 Lakhs (or ₹75 Lakhs where cash receipts do not exceed 5%).
Presumptive Business Declaring Lower Profit	Section 44AD & 44AB(e) of Income Tax Act, 1961 (Section 63 and corresponding presumptive section of Income-tax Act, 2025)	Declaring profit below 8% / 6% after having opted into presumptive scheme, with income above basic exemption.
Presumptive Professionals Declaring < 50% Profit	Section 44ADA & 44AB(d) of Income Tax Act, 1961 (Section 63 and corresponding presumptive section of Income-tax Act, 2025)	Total gross receipts up to ₹75L declaring net profit lower than 50% with income above basic threshold.
MSME Timely Payment Disclosure	The corresponding section of the Income-tax Act, 2025 (formerly Section 43B(h) of Income Tax Act, 1961)	Mandatory disclosure in Clause 22 of Form 3CD for payments delayed beyond 15/45 days to MSEs.

ONGOING GOVERNANCE

Mandatory Post-Registration Compliances

Failing to complete statutory post-incorporation actions carries steep daily penalties. Our CA firm manages continuous compliance:

Form 3CA/3CB with Form 3CD30th September of Assessment Year

Statutory Tax Audit Filing Due Date

Mandatory filing on the income tax portal. Delay attracts automatic penalty under Section 271B (0.5% of turnover up to ₹1,50,000).

Portal Dashboard VerificationImmediately upon CA upload

Client Portal Acceptance

The taxpayer must log in to their portal account, navigate to 'Pending Actions -> Worklist' and digitally approve the filed audit report.

Form ITR-3, ITR-5, or ITR-631st October of Assessment Year

ITR Filing for Audited Entities

Submission of the comprehensive income tax return with audited schedule disclosures and UDIN cross-referencing.

ICAI SQC-1 ComplianceMinimum 7 Years

Statutory Audit Working Paper Retention

Preserving audit files, external balance confirmations, sampling records, and management representation letters.

FREQUENTLY ASKED QUESTIONS

Statutory FAQs & Practical Guidance

Frequently asked questions and procedural guidance regarding Tax Audit under Section 63 (formerly Section 44AB).

What qualifies as a digital transaction for claiming the ₹10 Crore tax audit threshold?

To qualify for the enhanced ₹10 Crore turnover limit under Section 63 (formerly Section 44AB), both aggregate receipts (including turnover, loans, capital introduction) and aggregate payments (including expenses, capital expenditure, loan repayments) made in cash must not exceed 5% of their respective totals. Transactions via account payee cheques, demand drafts, NEFT, RTGS, IMPS, and UPI qualify as digital/banking channels.

What is the penalty for failing to get books of accounts audited or filing the audit report late?

Under Section 271B of the Income-tax Act, failing to furnish the tax audit report by the prescribed statutory due date attracts an automatic penalty equal to 0.5% of total turnover, sales, or gross receipts, subject to a maximum cap of ₹1,50,000, unless the taxpayer establishes reasonable cause for the failure.

How is Section 43B(h) MSME compliance reported in the Tax Audit Report?

Under Clause 22 of Form 3CD, the tax auditor is required to report any amount delayed beyond the statutory payment timelines prescribed under Section 15 of the MSMED Act, 2006 (15 days without agreement, up to 45 days with written agreement) to Micro and Small Enterprises. Any unpaid amount at financial year-end is disallowed and added back to taxable business income.

Can a private limited company file Form 3CB instead of Form 3CA?

No. A private limited company is statutorily required to get its financial statements audited under the Companies Act, 2013. Therefore, it must mandatorily file Form 3CA along with Form 3CD. Form 3CB is reserved exclusively for entities (such as proprietary firms or unregistered associations) that are not subject to audit under any other prevailing corporate statute.

STATUTORY ADVISORY DESK • PRACTICE INQUIRIES

Statutory Inquiries & Practice Advisory

Information on Tax Audit under Section 63 (formerly Section 44AB) is provided for general reference. Office addresses and contact details are listed on the Contact page.

Contact Practice Office +91 99140-14949