Tax audit rules for AY 2026-27 follow 1961 Act

The tax audit cycle for the 2025-26 period marks a transition in Indian tax law. It serves as the final audit cycle conducted under Section 44AB of the Income-tax Act, 1961, before the Income-tax Act, 2025 takes effect on April 1, 2026.

For Assessment Year (AY) 2026-27, taxpayers must continue to use Forms 3CA, 3CB, and 3CD. Failure to comply with audit requirements under the 1961 Act results in penalties under Section 271B, which are calculated as 0.5% of total sales, turnover, or gross receipts, capped at Rs. 1,50,000. Penalties may be waived if a reasonable cause is proven under Section 273B.

The new fixed late fees introduced by the Income-tax Act, 2025—Rs. 75,000 for delays up to one month and Rs. 1,50,000 for longer delays—will not apply to AY 2026-27. These new provisions will only apply to income earned from April 1, 2026, onwards.