Tax Audit Services in India

Tax Audit & Certification Services in India

EzyBiz India provides professional coordination and support for Tax Audit Services in India for companies, limited liability partnerships, partnership firms, proprietorships, professionals, foreign-owned businesses and other taxpayers carrying on business or profession.

A tax audit involves examination of the books of account and prescribed tax particulars to assess whether the taxpayer has maintained appropriate records and correctly reported matters relevant to the computation of taxable income.

EzyBiz India assists businesses with tax-audit readiness, preparation of reconciliations, review of tax-reporting disclosures, compilation of supporting documents and coordination of the audit process. Tax audits, attestations and certifications requiring an eligible practising Chartered Accountant are undertaken independently through our network partner Chartered Accountant firm.

Our approach is designed to help taxpayers identify tax and accounting issues in advance, complete prescribed reporting accurately and reduce avoidable differences between the books of account, tax audit report and income-tax return.

What Is a Tax Audit?

A tax audit is an examination of the books of account and prescribed tax information of a person carrying on business or profession.

For financial year 2025–26, tax audit requirements continue to be governed by section 44AB of the Income-tax Act, 1961. The tax auditor reports in Form 3CA or Form 3CB, as applicable, together with the statement of prescribed particulars in Form 3CD.

The tax-audit process may involve review of:

• books of account;
• financial statements;
• turnover or gross receipts;
• accounting policies;
• depreciation;
• statutory dues;
• tax deductions at source;
• inadmissible expenses;
• related-party payments;
• loans and deposits;
• deductions and exemptions;
• brought-forward losses;
• GST information;
• quantitative details;
• tax-computation adjustments; and
• other particulars prescribed in the applicable tax-audit form.

A tax audit does not determine the final tax liability by itself. It provides prescribed disclosures and observations that are used in preparing and evaluating the taxpayer’s return of income.

Purpose of Tax Audit

The tax-audit framework is intended to improve the reliability of financial and tax information reported by businesses and professionals.

A properly conducted tax audit helps:

• verify whether books of account have been maintained;
• examine whether income and expenditure have been properly recorded;
• identify expenses that may be disallowable under tax law;
• review depreciation and other tax deductions;
• reconcile statutory information with the books;
• report prescribed transactions and balances;
• improve consistency between financial statements and the income-tax return;
• identify significant compliance gaps; and
• support accurate computation of taxable income.

The tax auditor independently evaluates the relevant records and reports the prescribed particulars based on applicable law, supporting evidence and professional judgement.

Who Requires a Tax Audit in India?

Tax audit may apply to specified persons carrying on business or profession where the prescribed turnover, gross-receipt or presumptive-taxation conditions are met.

Under the existing framework applicable to financial year 2025–26, tax audit generally applies in the following circumstances.

Businesses Exceeding the General Turnover Threshold

A person carrying on business is generally required to obtain a tax audit where total sales, turnover or gross receipts exceed ₹1 crore during the financial year.

The determination of turnover may require professional evaluation, particularly where the taxpayer undertakes:

• trading in goods;
• service transactions;
• agency activities;
• commission business;
• futures and options transactions;
• share trading;
• speculative transactions;
• digital-platform transactions;
• export business; or
• activities involving reimbursements or pass-through collections.

Businesses Eligible for the Enhanced ₹10 Crore Threshold

The general ₹1 crore threshold may increase to ₹10 crore where:

• aggregate cash receipts do not exceed 5% of total receipts; and
• aggregate cash payments do not exceed 5% of total payments.

The conditions relating to cash receipts and payments must be examined separately. Both conditions must ordinarily be satisfied for the enhanced threshold to apply.

Amounts received or paid through prescribed non-account-payee modes may also require careful evaluation while applying these conditions.

Professionals Exceeding the Gross-Receipts Threshold

A person carrying on a profession is generally required to obtain a tax audit where gross professional receipts exceed ₹50 lakh during the financial year.

This may apply to eligible professionals such as:

• legal professionals;
• medical professionals;
• engineers;
• architects;
• accountants;
• technical consultants;
• interior decorators;
• authorised representatives;
• information-technology professionals; and
• other notified professional categories.

The nature of activities should be reviewed carefully because the classification of an activity as a business or profession may affect the applicable threshold and presumptive-taxation provisions.

Tax Audit in Presumptive-Taxation Cases

Tax audit may also become applicable where a taxpayer declares income below the amount prescribed under an applicable presumptive-taxation provision and satisfies the other relevant statutory conditions.

Such cases may arise under provisions relating to:

• eligible businesses;
• eligible professions;
• goods-carriage businesses;
• non-resident shipping or oil-service activities; and
• certain civil-construction or turnkey-power projects.

The applicability depends on the specific presumptive provision, the income declared, the taxpayer’s legal status, turnover or gross receipts, and whether the taxpayer’s income exceeds the applicable basic exemption limit.

A person should therefore not assume that tax audit applies merely because the declared profit is below a particular percentage. The complete statutory conditions must be examined.

Tax Audit for Different Types of Taxpayers

Tax Audit Services in India may be required by several categories of taxpayers.

Companies

Companies may require a tax audit in addition to their statutory audit under the Companies Act.

Where the company’s accounts have already been audited under another law, the tax-audit report for financial year 2025–26 is ordinarily furnished in Form 3CA together with Form 3CD.

Limited Liability Partnerships

An LLP may require a tax audit depending on its turnover, gross receipts, business activities and applicable presumptive-taxation provisions.

The tax-audit requirement is separate from any audit requirement arising under the Limited Liability Partnership Act.

Partnership Firms

A partnership firm may be subject to tax audit based on its business turnover, professional receipts or presumptive-taxation position.

The audit may require particular attention to:

• partner remuneration;
• interest paid to partners;
• capital accounts;
• profit-sharing ratios;
• related-party transactions; and
• compliance with the partnership deed.

Proprietorships

An individual carrying on business as a proprietor may require tax audit where the applicable turnover or presumptive-taxation conditions are met.

The audit may include review of business transactions, personal transactions recorded in the books, capital introduction, drawings and loans.

Professionals

Professionals may require tax audit where gross receipts exceed the applicable threshold or where specified presumptive-taxation conditions apply.

Professional receipts should be reconciled with:

• invoices;
• bank statements;
• tax-deduction certificates;
• GST returns;
• annual information statements; and
• other reporting records.

Foreign-Owned Indian Businesses

Indian subsidiaries and other foreign-owned entities may require tax audit in addition to statutory audit, transfer-pricing compliance and corporate tax reporting.

Such engagements may require coordination of:

• Indian books of account;
• group reporting packages;
• related-party information;
• intercompany expenses;
• foreign-currency transactions;
• withholding-tax records;
• transfer-pricing documentation; and
• overseas management explanations.

Difference Between Statutory Audit and Tax Audit

Statutory audit and tax audit are separate compliance requirements, although the same financial records may be relevant to both.

Statutory Audit

A statutory audit of a company is conducted under the Companies Act, 2013 or another applicable law.

Its principal objective is to enable the statutory auditor to express an opinion on whether the financial statements present a true and fair view in accordance with the applicable financial-reporting framework.

Tax Audit

A tax audit is conducted under the applicable income-tax law.

Its purpose is to examine and report prescribed particulars relevant to the computation and reporting of taxable income.

Key Distinction

A company may require both:

• a statutory audit under company law; and
• a tax audit under income-tax law.

Where accounts are audited under another law, Form 3CA is presently used along with Form 3CD. Where the accounts are not required to be audited under another law, Form 3CB is presently used with Form 3CD.

Tax Audit Forms Applicable for Financial Year 2025–26

For financial year 2025–26 corresponding to assessment year 2026–27, the existing tax-audit forms under the Income-tax Act, 1961 continue to apply.

Form 3CA

Form 3CA applies where the taxpayer’s accounts are required to be audited under another law.

It is commonly relevant to companies and other entities that are already subject to a statutory audit.

Form 3CA is furnished together with Form 3CD.

Form 3CB

Form 3CB applies where the taxpayer is not required to have the accounts audited under another law but is required to obtain a tax audit under the income-tax provisions.

Form 3CB is also furnished together with Form 3CD.

Form 3CD

Form 3CD contains the prescribed statement of particulars required to be reported as part of the tax audit.

It covers a wide range of tax and accounting matters, including:

• taxpayer details;
• books of account;
• method of accounting;
• depreciation;
• income not credited to the profit and loss account;
• inadmissible expenditure;
• statutory payments;
• TDS and TCS matters;
• related-party payments;
• loans and deposits;
• brought-forward losses;
• deductions;
• GST-related information; and
• other prescribed disclosures.

The exact reporting requirements depend on the clauses applicable to the taxpayer.

Transition to the Income-tax Act, 2025

The tax-audit framework is expected to transition under the Income-tax Act, 2025 for tax year 2026–27.

The Income Tax Department states that section 63 of the Income-tax Act, 2025 corresponds to section 44AB of the existing Act and retains the principal tax-audit thresholds. It also states that a unified Form 26 will replace Forms 3CA, 3CB and 3CD for tax year 2026–27.

Accordingly:

• financial year 2025–26 continues under Forms 3CA, 3CB and 3CD; and
• tax year 2026–27 is proposed to use unified Form 26 under the new framework.

The page should therefore be reviewed periodically to reflect the form and procedural requirements applicable to each tax year.

Our Tax Audit Service Approach

An efficient tax audit requires more than completing a prescribed form. It requires coordination between financial accounts, statutory records, tax computations and information reported to government authorities.

Our approach generally includes the following stages.

Initial Applicability Review

We review:

• legal status of the taxpayer;
• nature of business or profession;
• turnover or gross receipts;
• cash receipts and payments;
• presumptive-taxation history;
• applicable audit provisions;
• statutory-audit status; and
• relevant filing timelines.

This helps determine whether tax audit is applicable and which reporting form is required.

Tax Audit Information Request

A structured information request is prepared based on the taxpayer’s activities and applicable reporting clauses.

The information may include:

• trial balance;
• general ledger;
• financial statements;
• fixed-asset register;
• depreciation workings;
• tax-payment records;
• TDS and TCS information;
• GST returns;
• loans and deposits;
• related-party details;
• statutory-dues schedules;
• expense ledgers;
• deductions and exemptions; and
• previous tax returns and audit reports.

Reconciliation of Financial and Tax Information

Major balances and reporting information are reconciled before the tax-audit report is finalised.

This may include reconciliation of:

• turnover with GST returns;
• professional receipts with TDS records;
• revenue with bank receipts;
• expenses with TDS compliance;
• statutory liabilities with returns and challans;
• depreciation with the fixed-asset register;
• income with the Annual Information Statement; and
• financial statements with the income-tax computation.

Coordination With the Tax Auditor

EzyBiz India assists management and the accounting team in compiling information, responding to queries and resolving differences.

The tax-audit report, attestations and certifications are issued independently by the eligible network partner Chartered Accountant firm based on applicable law and professional standards.

Scope of Tax Audit Services

The scope of the engagement may include:

• assessment of tax-audit applicability;
• review of books and financial statements;
• Form 3CA or Form 3CB reporting;
• preparation and review of Form 3CD particulars;
• turnover and gross-receipts reconciliation;
• review of cash-receipt and cash-payment conditions;
• examination of tax disallowances;
• depreciation review;
• statutory-dues verification;
• TDS and TCS compliance review;
• related-party reporting;
• loans and deposits review;
• presumptive-taxation analysis;
• reconciliation with GST and information statements;
• tax-computation support;
• audit-query coordination; and
• electronic filing assistance.

Tax audits and reports requiring an eligible practising Chartered Accountant are undertaken independently through our network partner Chartered Accountant firm.

Review of Books of Account

The tax-audit process includes examination of the books of account and supporting records maintained by the taxpayer.

The review may cover:

• cash book;
• bank book;
• general ledger;
• sales register;
• purchase register;
• expense ledgers;
• journal entries;
• inventory records;
• fixed-asset register;
• customer and vendor ledgers;
• loan accounts;
• partner or proprietor capital accounts;
• statutory-liability ledgers; and
• other records relevant to the business or profession.

The tax auditor examines whether the books and records are consistent with the financial statements and whether material transactions have been appropriately recorded.

Where the records are incomplete, inconsistent or not maintained in a structured manner, additional reconciliations and supporting explanations may be required.

Turnover and Gross-Receipts Reconciliation

Correct determination of turnover or gross receipts is important for evaluating tax-audit applicability and completing the prescribed reporting.

Turnover may need to be reconciled with:

• sales ledgers;
• invoices;
• GST returns;
• e-invoice records;
• e-way bills;
• bank receipts;
• customer confirmations;
• export documents;
• credit notes;
• debit notes;
• Annual Information Statement;
• Taxpayer Information Summary; and
• financial statements.

Special consideration may be required in businesses involving:

• agency transactions;
• commission income;
• reimbursements;
• consignment sales;
• futures and options;
• speculative transactions;
• share trading;
• foreign-exchange transactions;
• online platforms;
• advances from customers;
• discounts and incentives; and
• pass-through collections.

The accounting value of transactions may not always represent turnover for tax-audit purposes. The nature and substance of the transaction should therefore be examined before determining the applicable turnover.

Review of Cash Receipts and Cash Payments

Businesses seeking to apply the enhanced turnover threshold should maintain reliable records of cash and non-cash transactions.

The review may include:

• cash sales;
• cash expenses;
• cash withdrawals;
• cash deposits;
• payments to employees;
• payments to vendors;
• customer collections;
• journal adjustments;
• receipts through non-account-payee instruments;
• payments through non-account-payee instruments; and
• transactions recorded through clearing or suspense accounts.

The conditions relating to cash receipts and cash payments are evaluated separately. Both prescribed limits must be satisfied for the enhanced threshold to apply.

A proper reconciliation should be maintained to explain the basis of the cash percentages reported.

Review of Method of Accounting

The tax audit may require reporting of the method of accounting followed by the taxpayer.

The review may consider whether the taxpayer follows:

• the mercantile system;
• the cash system; or
• another legally permissible basis applicable to the taxpayer.

The tax auditor may also examine:

• consistency of the accounting method;
• changes made during the year;
• effect of any change on profit;
• recognition of income;
• recording of expenses;
• year-end provisions;
• prepaid expenditure;
• accrued income; and
• outstanding liabilities.

Material changes in accounting policies or methods may require appropriate disclosure and quantification.

Review of Income Computation and Tax Adjustments

Accounting profit and taxable income are not always the same.

The tax-audit process may involve identifying adjustments relating to:

• income taxable under special provisions;
• expenses not allowable under tax law;
• depreciation differences;
• prior-period items;
• provisions and contingent liabilities;
• exempt income;
• capital receipts;
• deemed income;
• expenses relating to exempt income;
• personal expenditure;
• capital expenditure charged to revenue;
• income not credited to the profit and loss account; and
• deductions allowable only on payment or satisfaction of specified conditions.

These adjustments are considered while preparing the tax computation and reconciling it with the audited financial statements.

Review of Income Not Credited to the Profit and Loss Account

Certain receipts or income items may not have been credited to the statement of profit and loss but may still require tax consideration or disclosure.

The review may cover:

• sale of fixed assets;
• capital subsidies;
• government incentives;
• insurance claims;
• remission of liabilities;
• recovery of previously written-off amounts;
• forfeiture of advances;
• duty drawbacks;
• export incentives;
• compensation receipts;
• foreign-exchange gains;
• interest income;
• rental income; and
• other amounts reflected directly in reserves, capital accounts or balance-sheet ledgers.

The nature of each receipt should be examined to determine whether it is taxable, exempt, capital in nature or otherwise reportable.

Depreciation Review

Tax depreciation may differ from depreciation recorded in the financial statements.

The review may include:

• opening written-down value;
• assets purchased during the year;
• date of acquisition;
• date when the asset was put to use;
• assets used for less than the prescribed period;
• applicable depreciation rate;
• block-of-assets classification;
• sale or disposal of assets;
• foreign-exchange adjustments;
• government grants or subsidies;
• capitalisation of expenses;
• additional depreciation, where applicable; and
• closing written-down value.

The fixed-asset register should be reconciled with the general ledger and the tax-depreciation schedule.

Incorrect asset classification, unsupported additions or incomplete disposal details may lead to differences in the tax computation.

Review of Capital and Revenue Expenditure

The tax audit may involve examination of whether expenses have been classified correctly as capital or revenue expenditure.

Examples requiring review may include:

• major repairs;
• renovation costs;
• software implementation;
• website development;
• leasehold improvements;
• professional fees connected with asset acquisition;
• borrowing costs;
• trial-run expenses;
• project-development expenditure;
• installation costs; and
• expenses incurred before commencement of operations.

Capital expenditure generally cannot be claimed as an ordinary revenue expense, although depreciation or another deduction may be available subject to applicable law.

Revenue expenditure incorrectly capitalised may also affect taxable income and depreciation.

Review of Disallowable Expenditure

The tax audit requires reporting of specified expenses that may be inadmissible or restricted under the applicable income-tax provisions.

The review may include:

• personal expenditure;
• capital expenditure;
• penalties and fines;
• expenditure prohibited by law;
• income tax and related payments;
• unsupported business expenses;
• cash payments exceeding prescribed limits;
• payments without required tax deduction;
• excessive or unreasonable related-party payments;
• expenses relating to exempt income;
• delayed statutory payments;
• provisions not meeting tax-deduction conditions;
• employee-benefit payments;
• prior-period expenditure; and
• other expenses subject to specific restrictions.

A reported disallowance does not necessarily mean that the entire ledger balance is inadmissible. Each item should be examined based on its nature, documentation and applicable provision.

Payments Subject to Tax Deduction at Source

TDS compliance is a significant part of tax-audit reporting.

The review may cover:

• salary payments;
• contractor payments;
• professional and technical fees;
• rent;
• commission and brokerage;
• interest;
• purchase of goods;
• benefits or perquisites;
• payments to non-residents;
• director payments;
• royalty;
• software and licence charges;
• reimbursement arrangements; and
• other payments subject to withholding tax.

The tax auditor may examine whether:

• tax was required to be deducted;
• tax was deducted at the correct rate;
• deduction was made at the correct time;
• tax was deposited within the prescribed period;
• TDS returns were filed;
• payee details were correctly reported; and
• expenses require disallowance due to non-compliance.

The review should include reconciliation between expense ledgers, TDS returns, challans and certificates.

Tax Collected at Source Review

Where TCS provisions apply, the audit may include examination of:

• nature of goods or transactions;
• applicability of TCS;
• collection at the prescribed rate;
• timing of collection;
• deposit of tax;
• filing of TCS returns;
• customer declarations;
• exemptions or lower-rate certificates; and
• reconciliation with sales records.

Differences between sales ledgers and TCS returns should be identified and explained.

Review of Statutory Dues

Statutory liabilities recorded in the books may affect tax reporting and deduction eligibility.

The review may include:

• GST;
• TDS;
• TCS;
• provident fund;
• employee state insurance;
• professional tax;
• labour welfare fund;
• customs duties;
• excise-related liabilities, where relevant;
• bonus;
• gratuity contributions;
• leave encashment;
• interest payable to specified financial institutions; and
• other government dues.

The review may determine whether the liability was:

• properly recorded;
• paid within the applicable timeline;
• outstanding at year-end;
• disputed;
• deposited before the return-filing deadline; or
• allowable only in the year of actual payment.

Supporting returns and challans should be reconciled with the financial statements.

Employee Contributions and Payroll-Related Payments

Employee-related statutory deductions may require separate attention.

The review may cover:

• employee provident-fund contributions;
• employee ESI contributions;
• employer contributions;
• professional tax;
• labour welfare fund;
• bonus;
• gratuity;
• leave encashment;
• payroll taxes;
• salary TDS; and
• reimbursement of employee expenses.

Payroll records should be reconciled with the general ledger, statutory returns and bank payments.

Delayed employee contributions may have tax consequences even where the amounts are subsequently deposited.

Related-Party Payments

Payments to related persons may require reporting and evaluation of whether they are excessive or unreasonable compared with the fair value of the goods, services or facilities received.

The review may include payments to:

• directors;
• shareholders;
• partners;
• relatives;
• group companies;
• entities under common control;
• associated enterprises;
• key managerial personnel; and
• other specified persons.

Transactions may include:

• remuneration;
• interest;
• rent;
• professional fees;
• management charges;
• purchases;
• sales;
• loans;
• reimbursements;
• royalty; and
• use of shared resources.

The taxpayer should maintain agreements, invoices, approvals and the commercial basis supporting such transactions.

Partner Remuneration and Interest

For partnership firms and LLPs, the tax audit may include review of:

• partnership or LLP agreement;
• profit-sharing ratio;
• remuneration clauses;
• interest clauses;
• changes in constitution;
• admission or retirement of partners;
• partner capital accounts;
• drawings;
• remuneration paid;
• interest paid; and
• limits allowable under income-tax law.

Payments not authorised by the governing agreement or exceeding the permitted limits may require adjustment in the tax computation.

Loans, Deposits and Specified Transactions

The tax audit may require reporting of certain loans, deposits and specified receipts or repayments.

The review may include:

• loans accepted;
• deposits accepted;
• advances received;
• loans repaid;
• deposits repaid;
• transactions with directors or partners;
• journal-entry settlements;
• cash receipts and repayments;
• intercompany balances;
• security deposits;
• customer advances; and
• specified property-related transactions.

The mode of receipt or repayment should be examined to determine whether the transaction complies with applicable restrictions.

Complete information should ordinarily include:

• name of the party;
• permanent account number;
• amount;
• mode of transaction;
• opening balance;
• amounts accepted or repaid; and
• closing balance.

Review of Trade Receivables and Trade Payables

Although ordinary trade balances may not be loans or deposits, old or unusual balances may require further examination.

The review may cover:

• ageing of receivables;
• ageing of payables;
• credit balances in customer accounts;
• debit balances in vendor accounts;
• advances;
• balances written off;
• remission of liabilities;
• subsequent receipts and payments;
• related-party balances; and
• balances settled through journal entries.

Long-outstanding liabilities may require evaluation under provisions dealing with remission or cessation of trading liabilities.

GST Reconciliation

GST information is an important part of tax-audit preparation because turnover and expense data reported under GST should be broadly reconcilable with the financial statements.

The review may include reconciliation of:

• turnover as per books;
• turnover reported in GST returns;
• taxable supplies;
• exempt supplies;
• zero-rated supplies;
• export turnover;
• advances;
• credit notes;
• debit notes;
• branch transfers;
• related-party supplies;
• reverse-charge transactions;
• input tax credit; and
• annual GST reporting.

Differences may arise due to:

• timing;
• unbilled revenue;
• advances;
• non-GST income;
• accounting adjustments;
• credit notes;
• foreign-exchange differences; or
• transactions reported under a different registration.

Material differences should be supported by a clear reconciliation.

Reconciliation With Annual Information Statement

The Annual Information Statement and Taxpayer Information Summary may contain information received by the Income Tax Department from banks, customers, registrars and other reporting entities.

The review may include:

• interest income;
• dividend income;
• securities transactions;
• property transactions;
• foreign remittances;
• cash deposits;
• GST turnover;
• TDS information;
• TCS information;
• high-value purchases;
• mutual-fund transactions; and
• other reported financial information.

Differences between the information statements and the books should be examined before filing the tax-audit report and income-tax return.

A difference does not automatically mean that the books are incorrect, but an explanation and supporting reconciliation should be maintained.

Presumptive-Taxation Review

Where a taxpayer has opted for, or previously followed, presumptive taxation, the tax audit may require examination of:

• applicable presumptive provision;
• eligibility of the taxpayer;
• nature of activity;
• turnover or gross receipts;
• prescribed income percentage or amount;
• actual income declared;
• cash and digital receipts;
• books maintained;
• previous-year option history; and
• consequences of declaring lower income.

Tax-audit applicability should be determined after examining all conditions of the relevant provision rather than only comparing the declared profit with a percentage.

Review of Brought-Forward Losses and Unabsorbed Depreciation

The tax audit and tax computation may require reconciliation of brought-forward amounts.

The review may include:

• business losses;
• speculation losses;
• capital losses;
• losses from specified businesses;
• house-property losses;
• unabsorbed depreciation;
• assessment orders;
• previous returns;
• revised returns;
• appellate orders;
• rectification orders; and
• amounts already set off.

The figures should be reconciled year by year to ensure that only eligible and available losses are carried forward or adjusted.

Review of Deductions and Incentives

The taxpayer may claim deductions or incentives subject to prescribed conditions.

The review may include:

• employment-related deductions;
• scientific-research expenditure;
• specified-business deductions;
• donations;
• export-related incentives;
• infrastructure deductions;
• startup-related benefits;
• additional employee-cost deductions;
• bad debts;
• employee-benefit contributions;
• deductions linked to actual payment; and
• other business-specific deductions.

Supporting documents, approvals, certificates and calculations should be reviewed before the deduction is claimed.

Review of Quantitative Details

For manufacturing and trading businesses, tax-audit reporting may require quantitative information relating to principal items.

The review may cover:

• opening stock;
• purchases;
• production;
• sales;
• consumption;
• shortages;
• wastage;
• closing stock;
• by-products;
• scrap; and
• units of measurement.

Quantitative records should be reconciled with inventory accounts and financial statements.

Where complete quantitative records are not maintained, the limitation should be identified and appropriately addressed.

Tax Audit Support for Foreign-Owned Businesses

Foreign-owned Indian companies may face additional tax-audit issues because of cross-border transactions and group reporting requirements.

Our support may include:

• reconciliation of intercompany balances;
• review of management-service charges;
• royalty and licence payments;
• software payments;
• overseas reimbursements;
• expatriate costs;
• foreign-currency transactions;
• withholding-tax compliance;
• transfer-pricing coordination;
• permanent-establishment considerations;
• foreign remittances;
• group reporting adjustments; and
• reconciliation between Indian and overseas records.

The statutory audit, transfer-pricing report and tax-audit report should be reviewed together to avoid inconsistent disclosures.

Tax Audit Methodology

A structured tax-audit process may involve the following stages:

1. Applicability Assessment

The taxpayer’s legal status, activities, turnover, receipts and presumptive-taxation position are reviewed.

2. Information Collection

Financial statements, books, returns, reconciliations and supporting documents are compiled.

3. Clause-Wise Review

The applicable Form 3CD particulars are reviewed clause by clause for financial year 2025–26.

The official portal presently describes Form 3CD as comprising Part A for basic taxpayer particulars and Part B for the remaining prescribed reporting clauses.

4. Reconciliation

Turnover, GST, TDS, statutory dues, information statements and tax-computation figures are reconciled.

5. Query Resolution

Missing information, inconsistencies and potential tax adjustments are discussed with management.

6. Draft Reporting

The draft tax-audit particulars are prepared and reviewed with the supporting records.

7. Management Confirmation

Management confirms the completeness and accuracy of information and explanations provided.

8. Independent Audit Finalisation

The eligible network partner Chartered Accountant firm independently evaluates the audit evidence and finalises the applicable tax-audit report.

9. Electronic Filing

For financial year 2025–26, Form 3CA–3CD or Form 3CB–3CD, as applicable, is uploaded by the assigned Chartered Accountant through the income-tax e-filing portal using the prescribed electronic process.

Common Issues Identified During Tax Audits

Common matters that may delay or affect completion of a tax audit include:

• incomplete books of account;
• differences between GST returns and turnover;
• unreconciled bank accounts;
• missing fixed-asset details;
• incorrect depreciation;
• incomplete TDS compliance;
• delayed statutory payments;
• unsupported expenses;
• unreported related-party transactions;
• cash transactions requiring examination;
• incorrect presumptive-taxation assumptions;
• differences in Annual Information Statement;
• missing loan confirmations;
• old receivables or payables;
• incomplete quantitative records;
• unrecorded income;
• incorrect capital and revenue classification;
• unresolved partner-account differences; and
• inconsistency between statutory audit and tax computation.

Early identification of these issues helps reduce last-minute adjustments and improves consistency between the books, audit report and income-tax return.

The Income Tax Department describes the tax audit as a process for reporting prescribed information, observations and discrepancies relevant to allowances, deductions, losses, adjustments and the assessment of total income.

Documents Required for Tax Audit

The documents required for a tax audit depend on the taxpayer’s legal status, nature of business or profession, accounting system and applicable reporting clauses.

A typical information list may include the following:

Financial and Accounting Records

• trial balance;
• general ledger;
• cash book;
• bank book;
• sales register;
• purchase register;
• expense ledgers;
• journal-entry listing;
• draft or audited financial statements;
• schedules forming part of the financial statements;
• accounting policies;
• branch-wise accounts, where applicable;
• customer and vendor ageing;
• inventory records; and
• capital-account details.

Turnover and Receipt Records

• sales invoices;
• service invoices;
• credit notes;
• debit notes;
• export invoices;
• commission statements;
• professional receipt details;
• contract-wise revenue details;
• platform or marketplace statements;
• customer advances;
• turnover reconciliation;
• GST turnover reconciliation; and
• reconciliation with bank receipts.

Banking and Loan Documents

• bank statements;
• bank reconciliations;
• fixed-deposit details;
• loan agreements;
• loan confirmations;
• repayment schedules;
• interest workings;
• cash-credit and overdraft statements;
• security documents;
• deposits accepted or repaid; and
• details of transactions completed through journal entries.

Fixed Assets and Depreciation Records

• fixed-asset register;
• purchase invoices;
• sale or disposal documents;
• date of acquisition;
• date when assets were put to use;
• capital-work-in-progress details;
• depreciation as per books;
• tax-depreciation working;
• subsidy or grant details; and
• supporting documents for additional depreciation, where applicable.

Tax Deduction and Collection Records

• TDS returns;
• TCS returns;
• challans;
• deduction certificates;
• lower or nil deduction certificates;
• vendor-wise TDS reconciliation;
• non-resident payment details;
• expense-ledger reconciliation;
• declarations received from parties; and
• details of delayed deduction or deposit.

GST and Other Statutory Records

• GST returns;
• annual GST reconciliation;
• input-tax-credit details;
• reverse-charge records;
• e-invoice data;
• e-way bill records;
• provident-fund returns;
• employee state insurance records;
• professional-tax returns;
• labour welfare fund records;
• customs documents; and
• other statutory returns and challans.

Related-Party and Partner Records

• list of related parties;
• agreements with related entities;
• management-service arrangements;
• royalty agreements;
• rent agreements;
• partner remuneration details;
• interest paid to partners;
• capital-account statements;
• board or partner approvals;
• transfer-pricing documentation, where applicable; and
• basis of pricing for significant related-party transactions.

Income-Tax Records

• previous income-tax returns;
• previous tax-audit reports;
• tax computations;
• assessment orders;
• appellate orders;
• rectification orders;
• brought-forward loss schedules;
• unabsorbed depreciation details;
• advance-tax challans;
• self-assessment tax challans;
• Annual Information Statement;
• Taxpayer Information Summary; and
• notices or pending income-tax proceedings.

Management Information and Confirmations

• management accounts;
• budgets;
• major contracts;
• litigation details;
• contingent-liability information;
• details of exceptional transactions;
• subsequent-event information;
• management explanations;
• confirmations from customers, vendors or lenders; and
• management representation letter.

Additional information may be requested depending on the taxpayer’s transactions and the issues identified during the audit.

Tax Certification Services in India

In addition to tax-audit support, businesses may require certificates or attestations for tax, banking, regulatory, remittance or contractual purposes.

EzyBiz India assists in compiling documents, preparing workings and coordinating the certification process. Certificates and attestations requiring an eligible practising Chartered Accountant are issued independently through our network partner Chartered Accountant firm.

The nature and wording of a certificate depend on the applicable law, prescribed form, authority requirement and supporting evidence.

Tax and financial certification support may include:

• turnover certificates;
• net-worth certificates;
• tax-payment certificates;
• withholding-tax certificates;
• expenditure certificates;
• utilisation certificates;
• fund-certification statements;
• revenue certificates;
• capital-contribution certificates;
• remittance-related certificates;
• certificates required by banks or lenders;
• certificates required for tenders;
• certificates relating to financial information;
• management-certified data verification; and
• other prescribed or purpose-specific certifications.

A certificate can be issued only where sufficient supporting records and appropriate evidence are available.

Form 15CA and Form 15CB Support

Businesses making certain remittances outside India may require compliance involving Form 15CA and, where applicable, Form 15CB.

Our support may include:

• review of the nature of remittance;
• examination of invoice and agreement;
• determination of the payee’s residential status;
• review of taxability in India;
• evaluation of withholding-tax provisions;
• treaty analysis, where applicable;
• review of tax-residency certificate;
• examination of permanent-establishment declarations;
• preparation of tax workings;
• compilation of supporting documents;
• coordination of Form 15CB certification; and
• assistance with filing Form 15CA.

Form 15CB, where required, is certified independently by an eligible practising Chartered Accountant through our network partner CA firm.

The applicability of Form 15CA and Form 15CB depends on the nature, amount and taxability of the remittance and should be evaluated transaction by transaction.

Certification Support for Foreign-Owned Businesses

Foreign-owned Indian entities may require tax or financial certifications for:

• overseas parent companies;
• group auditors;
• banks;
• investors;
• foreign remittances;
• intercompany transactions;
• regulatory filings;
• transfer-pricing documentation;
• reimbursement arrangements;
• royalty or service payments;
• capital contributions;
• dividend remittances; and
• financial due diligence.

We assist management in reconciling Indian accounting records with overseas reporting requirements and compiling evidence needed for the certification.

Where information originates from group systems outside India, it should be reconciled with the Indian books and supporting records before certification.

Tax Audit Engagement Models

Tax-audit support may be structured according to the taxpayer’s accounting capability, transaction volume and complexity.

End-to-End Tax Audit Coordination

This model is suitable for taxpayers requiring assistance throughout the tax-audit process.

The scope may include:

• applicability assessment;
• preparation of information requirements;
• review of books and financial statements;
• clause-wise data compilation;
• statutory reconciliation;
• preparation of tax workings;
• query tracking;
• coordination with management;
• assistance with audit adjustments; and
• electronic-filing support.

Tax Audit Readiness Review

A readiness review may be conducted before the formal tax audit begins.

The review may identify:

• incomplete books;
• turnover differences;
• TDS defaults;
• delayed statutory payments;
• incorrect depreciation;
• unsupported expenses;
• related-party issues;
• loan and deposit concerns;
• information-statement differences;
• missing quantitative records; and
• incomplete Form 3CD information.

This helps management address issues before the audit report is finalised.

Form 3CD Data-Preparation Support

Businesses with an appointed tax auditor may engage EzyBiz India to prepare clause-wise data, reconciliations and supporting schedules for review by the auditor.

This model may include:

• preparing Form 3CD information;
• mapping ledgers to reporting clauses;
• reconciling statutory records;
• identifying missing documents;
• preparing explanations; and
• coordinating responses to audit queries.

Project-Based Tax Review

Project-based support may be provided for specific areas, such as:

• TDS compliance;
• GST reconciliation;
• tax depreciation;
• related-party transactions;
• loans and deposits;
• cash transactions;
• brought-forward losses;
• presumptive taxation;
• partner remuneration; or
• foreign remittances.

Co-Sourced Support With the Finance Team

Under a co-sourced model, EzyBiz India works with the taxpayer’s finance and tax teams to complete specified schedules and reporting requirements.

This approach is suitable for organisations that wish to retain internal ownership while obtaining external professional support.

Tax Audit Timeline

The time required to complete a tax audit depends on:

• size and nature of the taxpayer;
• volume of transactions;
• complexity of the business;
• number of locations;
• accounting quality;
• availability of supporting documents;
• number of reporting clauses applicable;
• statutory-reconciliation differences;
• pending accounting adjustments; and
• management responsiveness.

A typical process may involve the following stages:

Stage 1: Applicability and Planning

The applicable audit provisions, forms, timelines and responsibilities are determined.

Stage 2: Information Collection

Books, financial statements, returns, schedules and supporting documents are compiled.

Stage 3: Reconciliation and Review

Turnover, GST, TDS, statutory dues, depreciation, information statements and tax adjustments are reviewed.

Stage 4: Clause-Wise Reporting

The applicable tax-audit particulars are prepared and supported with working papers.

Stage 5: Query Resolution

Management provides documents, explanations and corrections in response to identified issues.

Stage 6: Tax Computation Coordination

The financial statements, audit observations and taxable-income computation are reconciled.

Stage 7: Audit Finalisation

The eligible network partner Chartered Accountant firm independently reviews the evidence and finalises the tax-audit report.

Stage 8: Electronic Submission

The applicable audit report is uploaded through the income-tax e-filing portal and accepted by the taxpayer in accordance with the prescribed procedure.

Taxpayers should begin preparation sufficiently in advance of the applicable audit-report and income-tax-return deadlines.

Responsibilities of the Taxpayer

The taxpayer and its management remain responsible for:

• maintaining proper books of account;
• recording all transactions completely;
• preparing financial statements;
• determining the applicable accounting policies;
• safeguarding business assets;
• providing accurate information;
• disclosing all bank accounts;
• reporting related-party transactions;
• providing details of loans and deposits;
• disclosing statutory defaults;
• maintaining supporting documents;
• providing tax returns and assessment records;
• explaining unusual transactions;
• confirming the completeness of information; and
• preparing and filing an accurate income-tax return.

The tax audit does not transfer management’s responsibility for the books, financial statements or tax return to the auditor.

Role of the Tax Auditor

The tax auditor independently examines relevant books, financial information and prescribed particulars in accordance with applicable law and professional standards.

The role may include:

• assessing the applicable reporting requirements;
• examining books and financial statements;
• evaluating supporting evidence;
• reviewing prescribed tax particulars;
• identifying inconsistencies;
• reporting qualifications or observations;
• examining statutory reconciliations;
• reviewing management explanations;
• completing the applicable audit report; and
• digitally submitting the report through the prescribed portal.

The tax auditor does not guarantee that the taxpayer will not be selected for assessment or that the tax authorities will accept every position taken in the return.

Benefits of a Professionally Managed Tax Audit

Accurate Tax Reporting

A structured review helps identify differences between accounting profit and taxable income.

Better Reconciliation

Turnover, GST, TDS, statutory payments and information statements can be reconciled before filing.

Early Identification of Tax Risks

Potential disallowances, reporting gaps and documentation weaknesses can be identified in advance.

Improved Filing Consistency

The financial statements, tax-audit report and income-tax return can be aligned to reduce contradictory reporting.

Stronger Documentation

Audit preparation helps organise supporting documents for expenses, deductions, loans, related parties and statutory payments.

Reduced Last-Minute Pressure

Advance preparation allows sufficient time to resolve accounting and tax issues before the filing deadline.

Better Preparedness for Assessment

Proper working papers and reconciliations can assist the taxpayer if information is later sought by the tax authorities.

Support for Banks and Stakeholders

Audited financial and tax information may also support financing, due diligence, tenders, investor review and other business requirements.

Why Choose EzyBiz India?

Experienced Chartered Accountant Leadership

The engagement is coordinated under the leadership of experienced Chartered Accountants and tax professionals familiar with accounting, tax audit and business compliance.

Integrated Tax and Accounting Knowledge

Our team understands the relationship between:

• financial statements;
• income-tax computation;
• GST reporting;
• TDS compliance;
• corporate law;
• payroll;
• transfer pricing;
• FEMA; and
• regulatory reporting.

This integrated approach helps identify inconsistencies across different compliance records.

Structured Clause-Wise Review

We use organised schedules, reconciliations, information requests and query trackers to support efficient completion of the tax audit.

Support for Complex Businesses

We assist companies, LLPs, partnership firms, proprietorships, professionals and foreign-owned businesses with industry-specific reporting issues.

Cross-Border Tax Experience

Foreign-owned companies may require review of withholding taxes, intercompany transactions, transfer pricing and overseas remittances. Our team assists with coordinated reporting across these areas.

Practical and Business-Focused Approach

We help management understand the commercial and tax implications of identified issues and organise appropriate supporting evidence.

Network Partner Chartered Accountant Firm

Tax audits, certificates and attestations requiring an eligible practising Chartered Accountant are undertaken independently through our network partner Chartered Accountant firm.

Frequently Asked Questions

What is the purpose of a tax audit?

A tax audit involves examination and reporting of prescribed financial and tax particulars to support accurate income-tax reporting.

Is tax audit compulsory for every business?

No. Tax audit applies only where the applicable turnover, gross-receipt, presumptive-taxation or other statutory conditions are satisfied.

Is tax audit applicable when business turnover exceeds ₹1 crore?

Tax audit may generally apply where business turnover exceeds the prescribed general threshold. An enhanced threshold may apply where the specified conditions concerning cash receipts and cash payments are met.

Is tax audit compulsory where turnover is below ₹1 crore?

It may still apply in specified presumptive-taxation situations or under another applicable provision. The complete facts should be reviewed.

What is the tax-audit limit for professionals?

The applicable professional gross-receipt threshold should be evaluated under the law relevant to the financial year.

Is statutory audit the same as tax audit?

No. Statutory audit is conducted under company law or another applicable law, while tax audit is conducted under income-tax law.

An entity may require both.

Which form is used for tax audit?

For financial year 2025–26, Form 3CA or Form 3CB is used, as applicable, together with Form 3CD.

The applicable form depends on whether the accounts are audited under another law.

Who can sign a tax-audit report?

A tax-audit report must be signed and submitted by an eligible practising Chartered Accountant.

Can EzyBiz India conduct tax audits?

EzyBiz India provides tax-audit readiness, accounting review, reconciliation, data preparation and coordination support.

Tax-audit reports and attestations requiring a practising Chartered Accountant are undertaken independently through our network partner Chartered Accountant firm.

Does tax audit mean that every transaction is verified?

No. The auditor generally applies risk-based and test-check procedures based on materiality and professional judgement.

Does tax audit guarantee acceptance of the income-tax return?

No. The tax authorities may independently examine the return, audit report, transactions and legal positions taken by the taxpayer.

What happens if the books are incomplete?

Incomplete books may delay the audit, require additional procedures and result in qualifications, observations or inability to report certain particulars accurately.

Can a tax audit be completed before the statutory audit?

Where statutory audit figures are relevant to the tax audit, the tax-audit report is generally finalised after or in coordination with the statutory audit.

Are GST returns checked during tax audit?

GST information is commonly reconciled with turnover, purchases and expenses recorded in the books.

Is TDS compliance reviewed during tax audit?

Yes. Applicable TDS and TCS reporting is an important part of tax-audit review.

Are loans and deposits reported in the tax audit?

Specified loans, deposits, receipts and repayments may require reporting, depending on their nature and the applicable provisions.

Are related-party transactions covered?

Specified payments to related persons and other related-party matters may require examination and reporting.

Is a tax audit required for a loss-making business?

Tax-audit applicability is not determined only by profit or loss. Turnover, legal status and presumptive-taxation conditions must also be examined.

Can the tax auditor prepare the income-tax return?

Tax-return preparation and tax-audit services may be coordinated, subject to applicable professional requirements and independence considerations.

When should tax-audit preparation begin?

Preparation should begin soon after the financial year closes and once the books are substantially complete.

Early preparation provides time for reconciliations, corrections and collection of supporting documents.

How long does a tax audit take?

The timeline depends on the volume of transactions, quality of records, complexity of reporting and speed of query resolution.

Related Audit and Assurance Services

• Audit & Assurance Services in India
• Statutory Audit Services in India
• Internal Audit & Risk Advisory Services in India

Other Core Practice Areas

• India Market Entry Consulting
• Tax & Regulatory Services
• Corporate Finance Advisory Services
• Managed Business Services
• Business Registrations & Licences
• Global Business Expansion Services

Need Assistance With Tax Audit in India?

EzyBiz India assists companies, LLPs, partnership firms, proprietorships, professionals and foreign-owned businesses with tax-audit applicability, audit readiness, Form 3CD data preparation, reconciliations, documentation and coordination.

Tax audits, certificates and attestations requiring an eligible practising Chartered Accountant are undertaken independently through our network partner Chartered Accountant firm. Discuss Your Tax Audit Requirements

Professional Disclaimer

The information provided on this page is general in nature and should not be treated as legal, accounting, tax or professional advice for any particular taxpayer.

Tax-audit applicability, reporting requirements, forms and timelines depend on the law applicable to the relevant financial year and the taxpayer’s legal status, activities, turnover, transactions and circumstances.

Tax-audit reports, certificates and attestations requiring an eligible practising Chartered Accountant are issued independently by the appointed network partner Chartered Accountant firm in accordance with applicable laws and professional standards.

Prepared by:
 EzyBiz India Consulting LLP

Reviewed by:
Network Partner Chartered Accountant Firm

Last updated:
July 2026