For the financial year 2025-26 (Assessment Year 2026-27) in India, the income tax audit limits under Section 44AB generally remain at ₹1 crore for businesses (up to ₹10 crore if 95% transactions are digital) and ₹50 lakh for professionals, as per Vyapar TaxOne. For chartered accountants, ICAI has revised the tax audit limit to a maximum of 60 audits per partner, applicable from April 2026, notes CAalley.com.
with gross receipts exceeding Rs 1 crore in business or Rs 50 lakhs in profession. The purpose is to authenticate the accounts, verify compliance with income tax provisions, and submit a tax audit report with the Income Tax Return. The last date for filing the income tax audit for the FY 2025-26 is 30th September 2026.
In 2025, taxpayers earning over $400,000 annually face significantly higher audit rates, especially if income sources include self-employment, capital gains, or cryptocurrency.
The deadline, which was earlier September 30, 2025, has been extended to October 31, 2025. CBDT issued the order for assessees covered via clause (a) of Explanation 2 to section 139(1)—i.e., those required to furnish a report of audit under any provision of the Income-tax Act (other than Section 92E).
In both 2025 and 2026, non-federal entities that accept $1 million or more in federal assistance must complete an annual single audit. Before 2025, the single audit threshold was $750,000. Single audit rules apply regardless of whether your organization receives federal funds directly or indirectly.
Understanding the changes to audit exemption in 2025
The changes are designed to reduce reporting requirements and simplify financial reporting. Companies that meet the new thresholds will be exempt from statutory audit requirements.
In India, the government's financial year runs from 1 April to 31 March the following year. The financial year from 1 April 2025 to 31 March 2026 would generally be abbreviated as FY 2025–26 or( FY25-26) ( FY2025/26),(FY2025/2026),(FY25/26), but it may also be called FY 2026 or FY26 on the basis of the ending year.
(Additionally, for tax year 2025, the OBBB raises the standard deduction amount to $31,500 for married couples filing jointly. For single taxpayers and married individuals filing separately, the standard deduction for 2025 is $15,750, and for heads of households, the standard deduction is $23,625.)
Generally, the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually don't go back more than the last six years. The IRS tries to audit tax returns as soon as possible after they are filed.
The IRS 7-year rule primarily applies to keeping records for claiming a deduction for bad debts or losses from worthless securities, allowing a longer period to file for a credit or refund, but it's not a universal audit limit; it's often a recommended safe buffer for general record-keeping, with the standard IRS audit period usually being 3 years, extending to 6 years for substantial income omission (over 25%) or foreign income issues, and indefinitely for fraud.
ICAI will implement new guidelines from April 2026, limiting each partner in accounting firms to a maximum of 60 tax audits annually.
Exception 1: Where a person: • Declares profits and gains for the previous year u/s 44AD; and • His total sales / turnover / gross receipts in business do not exceed ₹ 2 crore in the previous year, - then, the provision of tax audit is not applicable.
Section 44AB is that section of the Income Tax Act 1961 that mandates tax audit if a business's total sales, turnover, or gross receipts exceed Rs. 1 Crore (Rs. 10 Crore for up to 5% cash transactions) in a financial year.
Some of the major tax changes effective from April 1, 2025, are revised tax slabs, rebate of up to Rs. 60,000, revised ITRU deadlines, calculation of partner's remuneration allowable as a deduction and revised TDS/TCS threshold limits. What is the Rebate available under section 87A?
Tax changes for 2025, largely driven by the "One Big Beautiful Bill" (OBBBA) Act, introduce significant deductions for seniors, tips, overtime, and auto loan interest, expand the Child Tax Credit, and raise the SALT deduction cap to $40,000, while making several 2017 Tax Cuts and Jobs Act provisions permanent, including the seven tax brackets. Key changes include a $2,200 Child Tax Credit, a $6,000 senior deduction, deductions for qualified tips and overtime, and a permanent standard deduction increase.
One Big Beautiful Bill Tax Law Changes for your 2026 (and on) tax returns
The income tax slab rates under the new tax regime for FY 2025–26 are as follows: income up to ₹4 lakh is tax-free; ₹4 lakh to ₹8 lakh is taxed at 5%; ₹8 lakh to ₹12 lakh at 10%; ₹12 lakh to ₹16 lakh at 15%; ₹16 lakh to ₹20 lakh at 20%; ₹20 lakh to ₹24 lakh at 25%; and income above ₹24 lakh is taxed at 30%.
For individuals, the last day to file your 2025 taxes without an extension is April 15, 2026. You can submit Form 4868 to request an extension to file later during the year. The last day to file your tax return isn't the only important tax deadline to know, however.
Common ITR Filing Mistake 1: Missing the Filing Deadline
The most avoidable mistake is missing the due date. For most individual taxpayers, the deadline for FY 2024-25 is 15th September 2025 (extended from July 31).
If your agency expends $1,000,000 or more in federal awards issued on or after October 1, 2024, then you must undergo a Single Audit for fiscal years ending on or after September 30, 2025. If your agency's federal awards were issued before October 1, 2024, the previous threshold of $750,000 still applies.
The 2-year rule for audit is quite simple. If a company meets two or more of the above criteria for two years in a row, then it must have a statutory audit. Conversely, a firm that currently has to be audited can't qualify for an audit exemption until it fails to meet at least two over the criteria over two years.