Form 26 (Parts A–D) — Tax Audit Report Under Section 63, Schedule by Schedule

The tax audit under section 63 of the Income-tax Act, 2025 is a critical compliance requirement for businesses and professionals exceeding specified turnover or gross receipt thresholds. The tax audit report in Form 26 is the prescribed form for reporting the results of the audit. Understanding each part of Form 26 is essential for accountants, taxpayers, and tax professionals to ensure accurate and complete reporting.

Overview of Section 63

Statutory Provision

Section 63 requires every person carrying on business or profession to get their accounts audited by an accountant before the specified date if they meet certain conditions.

Applicability Conditions

Table in Section 63(1)

1. Business Turnover: Total sales, turnover, or gross receipts in business exceeds Rs. 1 crore

   • For businesses where cash receipts and payments are each ≤ 5% of the total, the threshold is Rs. 10 crore

2. Profession Gross Receipts: Gross receipts in profession exceeds Rs. 50 lakh

3. Presumptive Taxation: If the person is carrying on business or profession referred to in section 58(2) or 61(2) (Table: Sl. Nos. 4 and 5) and claims profits lower than deemed profits

Specified Date

The specified date is the date one month prior to the due date for furnishing the return of income under section 263(1).

Due Dates

Exemption

The provisions of section 63 do not apply where profits and gains of business or profession declared by the assessee are as per section 58(2) or 61(2).

Form 26 — Tax Audit Report

Structure of Form 26

Form 26 is divided into four parts:

• Part A: Audit Report under section 63 (For persons required to be audited under any other law)
• Part B: Audit Report under section 63 (For persons not required to be audited under any other law)
• Part C: Particulars to be furnished (Detailed information in clauses 1 to 56)
• Part D: Particulars to be furnished (Additional information in clauses 57 to 60)

Verification

The report shall be signed and verified by:

• The accountant (as defined in section 515(3)(b))
• In the case of a firm or LLP, by the partner or designated partner

Part A — Audit Report (Audited Under Other Law)

Applicability

This part applies to a person who is required by or under any other law to get their accounts audited.

Contents

• Name and address of the person
• PAN of the person
• Tax year for which the report is furnished
• Whether the person is required to be audited under any other law
• Name of the law under which audit is required
• Name and address of the auditor
• Date of audit report under the other law
• Opinion on whether the accounts give a true and fair view
• Opinion on compliance with section 63

Significance

If the assessee is already audited under another law (e.g., Companies Act), a separate tax audit under section 63 is not required, but the tax audit report in Form 26 must still be filed with the income-tax return. Part A is used in such cases.

Part B — Audit Report (Not Audited Under Other Law)

Applicability

This part applies to a person who is not required to be audited under any other law.

Contents

• Name and address of the person
• PAN of the person
• Tax year for which the report is furnished
• Opinion on whether the accounts give a true and fair view
• Opinion on compliance with section 63
• Statement that the audit was conducted as per the rules

Significance

Part B is used when the assessee is not audited under any other law but is required to be tax audited under section 63.

Part C — Particulars to be Furnished

This is the detailed schedule containing 56 clauses. Each clause requires specific information.

Line-by-Line Explanation of Key Clauses

Clause 1: Name and address of the person

• Full legal name, PAN, and address

Clause 2: Nature of business or profession

• Brief description of the business or profession

Clause 3: Status

• Individual, HUF, company, firm, LLP, AOP, BOI, local authority, etc.

Clause 4: Tax year

• The tax year for which the report is furnished

Clause 5: Date of commencement of business or profession

• Date when the business or profession was set up

Clause 6: Whether the person is required to be audited under any other law

• Yes/No, and details of the law

Clause 7: Name and address of the auditor

• The accountant who conducted the tax audit

Clause 8: Date of audit report

• Date on which the audit report was signed

Clause 9: Books of account

• Whether books of account are maintained
• Whether they are maintained at the principal place of business

Clause 10: Method of accounting

• Cash, mercantile, or any other method
• Whether the method is regularly followed

Clause 11: Method of valuation of closing stock

• The method followed (cost, market value, etc.)

Clause 12: Whether the accounts are in agreement with the audited accounts

• Yes/No, and details of discrepancies

Clause 13: Whether the person has maintained the prescribed books of account

• As per section 62 and Rule 46

Clause 14: Whether the person has maintained the prescribed information and documents

• As per section 171 and Rule 84

Clause 15: Details of international transactions

• Nature and amount of international transactions
• Whether the same has been reported in Form 3CEB

Clause 16: Details of specified domestic transactions

• Nature and amount of specified domestic transactions
• Whether the same has been reported in Form 3CEB

Clause 17: Whether the person is liable to get the accounts audited under section 63

• Yes/No, and reason for liability

Clause 18: Whether the person has claimed deduction under section 45(2)

• Yes/No, and details of the claim

Clause 19: Whether the person has claimed deduction under Chapter VIII

• Details of deductions claimed

Clause 20: Whether the person has claimed deduction under section 58(2) or 61(2)

• Yes/No, and details of the claim

Clause 21: Details of depreciation

• Block of assets
• Depreciation rates
• Depreciation claimed
• Unabsorbed depreciation

Clause 22: Details of capital gains

• Nature of capital assets
• Transfer details
• Calculation of capital gains

Clause 23: Details of income from house property

• Number of properties
• Annual value
• Deductions claimed

Clause 24: Details of salary income

• Whether the person is a director in any company
• Whether the person has held any unlisted equity shares

Clause 25: Details of assets

• Assets (including financial interest) located outside India
• Signing authority in accounts outside India

Clause 26: Details of investments

• Investments in shares, securities, immovable property, etc.

Clause 27: Details of loans and deposits

• Loans taken or given
• Deposits accepted or made

Clause 28: Details of cash transactions

• Cash receipts and payments exceeding prescribed limits
• Non-compliance with section 36(4) (cash payments exceeding Rs. 10,000)

Clause 29: Details of payments to specified persons

• Payments to relatives, partners, directors, etc.
• Whether considered excessive or unreasonable

Clause 30: Details of deductions and allowances

• Deductions claimed under sections 28 to 54
• Allowances claimed

Clause 31: Details of TDS and TCS

• Tax deducted at source (TDS)
• Tax collected at source (TCS)
• Whether the provisions of Chapter XIX-B have been complied with

Clause 32: Details of advance tax

• Advance tax payments
• Whether the provisions of Part C of Chapter XIX have been complied with

Clause 33: Details of tax payments

• Tax paid during the tax year
• Self-assessment tax
• Tax on updated return

Clause 34: Details of refund

• Whether any refund is due
• Whether any refund has been claimed

Clause 35: Details of interest

• Interest paid or payable
• Whether interest has been charged under the Act

Clause 36: Details of penalties

• Penalties paid or payable
• Whether any penalty has been levied

Clause 37: Details of proceedings

• Assessment, reassessment, or recomputation proceedings
• Whether any proceedings are pending

Clause 38: Details of appeals

• Appeals filed
• Appeals pending

Clause 39: Details of international transactions with associated enterprises

• As per section 163
• Whether maintained in Form 3CEB

Clause 40: Details of specified domestic transactions

• As per section 164
• Whether maintained in Form 3CEB

Clause 41: Whether the person has complied with the provisions of section 171

• Maintenance of information and documents
• Furnishing of information and documents

Clause 42: Whether the person has furnished the report under section 172

• Form 3CEB
• Whether the report was furnished on or before the specified date

Clause 43: Details of secondary adjustments

• Whether secondary adjustment is required under section 170
• Details of the adjustment

Clause 44: Details of safe harbour

• Whether the person has exercised the option under safe harbour
• Details of the option

Clause 45: Details of advance pricing agreement

• Whether the person has entered into an APA
• Details of the APA

Clause 46: Details of general anti-avoidance rule

• Whether GAAR is applicable
• Details of arrangements

Clause 47: Details of income not included in total income

• Income exempt under Schedules II to VIII
• Details of the exemption

Clause 48: Details of donations

• Donations received
• Donations made
• Compliance with section 133 and 135

Clause 49: Details of registered non-profit organisation

• Whether the person is a registered non-profit organisation
• Compliance with Part B of Chapter XVII

Clause 50: Details of electoral trust

• Whether the person is an electoral trust
• Compliance with Schedule VIII

Clause 51: Details of political party

• Whether the person is a political party
• Compliance with Schedule VIII

Clause 52: Details of business trust

• Whether the person is a business trust
• Compliance with section 223

Clause 53: Details of investment fund

• Whether the person is an investment fund
• Compliance with section 224

Clause 54: Details of securitisation trust

• Whether the person is a securitisation trust
• Compliance with section 221

Clause 55: Details of venture capital company or venture capital fund

• Whether the person is a venture capital company or venture capital fund
• Compliance with section 222

Clause 56: Any other information

• Any other information required to be furnished

Part D — Particulars to be Furnished (Additional Information)

This part contains clauses 57 to 60, which require additional information not covered in Part C.

Clause 57: Whether the person is a company, firm, LLP, etc.

• Details of partners, members, directors, etc.

Clause 58: Whether the person has filed the return of income

• Whether the return was filed on or before the due date

Clause 59: Whether the person has complied with the provisions of section 392 (TDS on salary)

• Whether tax has been deducted at source on salary payments

Clause 60: Any other information

• Any other information required to be furnished

Practical Considerations

Timely Filing

Form 26 must be filed before the specified date (one month before the due date of the return). The accountant must complete the audit and prepare the report well in advance.

Accuracy

All information in Form 26 must be accurate and complete. Inaccuracies may lead to penalties, interest, or disallowance of deductions.

Scope of Audit

The tax audit under section 63 is not the same as a statutory audit under the Companies Act. The tax audit focuses on compliance with the Income-tax Act.

Documentation

The assessee must provide all necessary documents and information to the accountant for the audit.

Penalties for Non-Compliance

• Failure to get accounts audited: Penalty under section 446 (lesser of 0.5% of turnover or Rs. 1,50,000)
• Failure to furnish audit report: Penalty under section 446
• Failure to maintain books of account: Penalty under section 441

Expert Advisory

Given the complexity of Form 26 and the tax audit process, professional advisory is essential. Anuj Desai & Associates provides comprehensive tax audit services, including:

• Audit Preparation: Assistance with preparation for tax audit
• Documentation: Compilation of required documents
• Form 26 Preparation: Preparation of Form 26
• Compliance Review: Review of compliance with section 63
• Representation: Representation before tax authorities

With deep expertise in tax audit provisions, Anuj Desai & Associates ensures that your tax audit is conducted accurately and filed on time.

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Need expert assistance with tax audit under section 63 or Form 26? Contact Anuj Desai & Associates today for comprehensive audit, preparation, and compliance services. [Contact Us] to schedule a consultation.