Sub-section (1) requires every person carrying on a business or profession who meets any condition in column B of the Table to get the year's accounts audited by an accountant before the specified date. The Table has two entries: entry 1 covers turnover thresholds — one crore rupees for business, raised to ten crore rupees where cash receipts and cash payments each stay within 5%, and fifty lakh rupees of gross receipts for a profession — and entry 2 covers a person carrying on a business or profession referred to in section 58(2) or 61(2) (Table: Sl. Nos. 4 and 5) who claims profits lower than the deemed profits. Sub-section (2) disapplies the section where the assessee simply declares profits in line with section 58(2) or 61(2). Sub-section (3) requires the audit report to be furnished by the specified date in the prescribed form, signed and verified by the accountant. Sub-section (4) treats an audit under any other law as sufficient compliance if done before the specified date and if the report under that law is furnished by that date together with the accountant's report in the prescribed form. Sub-section (5) defines "specified date" as one month before the section 263(1) return due date, and deems a non-account-payee cheque or bank draft to be cash.
Why it is there
It puts an independent accountant between larger businesses and their return, and between the Department and anyone who claims to have earned less than the presumptive figure the Act deems for them. The raised ten crore threshold is the reward for a near-cashless business; the deemed-cash rule for non-account-payee instruments stops that concession being manufactured on paper.
Who it applies to
Every person carrying on a business whose total sales, turnover or gross receipts exceed the threshold
Every person carrying on a profession whose gross receipts exceed fifty lakh rupees
A person carrying on a business or profession referred to in section 58(2) or 61(2) who claims profits lower than the deemed profits
An accountant signing and verifying the report
The figures, and what each one turns on
Read the condition in the same row. A figure quoted without it is a wrong answer with a citation attached.
What
Figure
The condition on it
Where
Turnover threshold for a business
One crore rupees
Total sales, turnover or gross receipts in the tax year; subject to the raised threshold in clause (b)
Sub-section (1), Table Sl. No. 1(a)
Raised turnover threshold for a business
Ten crore rupees
Substituted for one crore rupees only where both cash tests in clause (b) are met
Sub-section (1), Table Sl. No. 1(b)
Cash receipts test for the ten crore threshold
Not more than 5%
Aggregate of all amounts received in cash during the tax year, including for sales, turnover or gross receipts, as a proportion of that amount
Sub-section (1), Table Sl. No. 1(b)(i)
Cash payments test for the ten crore threshold
Not more than 5%
Aggregate of all payments made in cash during the tax year, including expenditure incurred, as a proportion of that payment
Sub-section (1), Table Sl. No. 1(b)(ii)
Gross receipts threshold for a profession
Fifty lakh rupees
Gross receipts in profession in any tax year
Sub-section (1), Table Sl. No. 1(c)
The specified date for audit and for furnishing the report
One month prior to the return due date
The due date for furnishing the return of income under section 263(1) for that tax year
Sub-section (5)(a)
What this means in practice
Two dates matter and they are the same date: the audit must be completed before the specified date and the report furnished by it, and that date is one month ahead of your return due date under section 263(1), not the return date itself. Before assuming the ten crore threshold applies, test cash receipts and cash payments separately — both must be within 5%, and payments or receipts by cheque or bank draft that are not account payee count as cash for this purpose under sub-section (5)(b). If you are already audited under another law, sub-section (4) spares you a second audit but not a second filing: both that report and the accountant's report in the prescribed form must be furnished by the specified date.
An example
Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.
A firm's turnover for the tax year is Rs 4 crore. Its cash receipts run at 3% of receipts, inside the clause (b)(i) test, but its cash payments come to 7%, above the 5% figure in clause (b)(ii); because clause (b) needs both tests satisfied before ten crore rupees is substituted, the one crore rupee threshold in clause (a) stands and the accounts must be audited. Had cash payments stayed at 5% or below, a Rs 4 crore turnover would have sat well inside the ten crore figure and no audit would have arisen. A cheque that is not account payee would not have saved it either — sub-section (5)(b) deems such a payment to be cash — and the audit and the report are both due by the specified date, which sub-section (5)(a) sets one month before the section 263(1) return due date, not on it.
Where you meet this section
You meet it as the accountant's audit report, in the prescribed form, signed and verified and furnished by the specified date under sub-section (3) — one month ahead of the return. It resurfaces in assessment or penalty proceedings where turnover or gross receipts are shown to have crossed the one crore, ten crore or fifty lakh rupee lines.
The words themselves
"specified date" in relation to the accounts of the assessee of the tax year, means the date one month prior to the due date for furnishing the return of income under section 263(1)
Section section 63(5)(a), Income-tax Act, 2025.
What people get wrong
Reading the specified date as the return filing date. Sub-section (5)(a) sets it one month earlier than the section 263(1) due date.
Treating any non-cash payment as non-cash. A cheque or bank draft that is not account payee is deemed to be cash under sub-section (5)(b) and can push a business back to the one crore threshold.
Applying only one of the two 5% tests. Clause (b) requires both the receipts test and the payments test to be satisfied before ten crore rupees is substituted.
Assuming a presumptive-scheme assessee is always outside audit. Table entry 2 brings in anyone under section 58(2) or 61(2) (Table: Sl. Nos. 4 and 5) who claims profits lower than the deemed profits; sub-section (2) exempts only those who declare as per those sections.
What this replaced, and what changed
1961 provision
What changed in the move
s.44AB
1. Three separate clauses for presumptive assessees become one Table row, and in doing so the income condition disappears from the face of the audit section. S.44AB(d) and (e) applied only where the assessee's 'income exceeds the maximum amount which is not chargeable to income-tax'; Table Sl. No. 2 of s.63 carries no such condition, even though s.58(3) still imposes it for the s.58(2) cases. The two provisions do not read consistently. 2. The exemption in sub-section (2) widens. In 1961 it covered only a person declaring under s.44AD(1) or s.44ADA(1); s.63(2) covers anyone declaring as per s.58(2) or s.61(2), which brings in the goods-carriage and non-resident presumptive schemes. 3. The express carve-out for persons deriving income of the nature referred to in s.44B or s.44BBA (the second proviso to s.44AB) is not reproduced as a separate exemption; such persons now come out through s.63(2) only if they declare as per s.61(2). 4. The definition of 'accountant' by reference to s.288(2), which s.44AB carried in its own Explanation, is not in s.63. 5. The thresholds themselves are unchanged: one crore, ten crore on the 5% conditions, fifty lakh for a profession, and the specified date remains one month before the return due date.
How we established this. Read s.63 of the 2025 Act against s.44AB of the 1961 Act. Both are the audit provision and the operative wording is the same: 1961 - 'carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year'; 2025 Table Sl. No. 1(a) - the same words with 'tax year' for 'previous year' and the addition of 'subject to the provisions of clause (b)'. The first proviso to s.44AB(a), with its two five-per-cent tests and the direction that 'this clause shall have effect as if for the words "one crore rupees", the words "ten crore rupees" had been substituted', is reproduced as Table Sl. No. 1(b) in the same construction. S.44AB(b) (profession, fifty lakh rupees) becomes Table Sl. No. 1(c). S.44AB(c), (d) and (e) - the presumptive assessee claiming lower profits - are compressed into Table Sl. No. 2. The first proviso to the closing words ('this section shall not apply to a person, who declares profits and gains ... In accordance with sub-section (1) of section 44AD or sub-section (1) of section 44ADA') becomes s.63(2). The third proviso (audit under any other law is sufficient compliance provided the report and a further accountant's report are furnished by the specified date) becomes s.63(4). The second proviso to clause (a) deeming a non-account-payee cheque or draft to be cash becomes s.63(5)(b). Explanation (ii), defining 'specified date' as the date one month prior to the s.139(1) due date, becomes s.63(5)(a) with s.263(1) substituted.
Rules that serve this section
Rules of the Income-tax Rules, 2026 that work section 63. Where the rule’s own heading names the section we say so; the rest are marked on reading the rule, which is our derivation and not the department’s. A rule that serves the section silently and that we have missed will not appear here.
Rule 47 — Report of audit of accounts to be furnished under section 63
Rule 54 — Form of report of an accountant in respect of slump sale — on reading the rule
Rule 66 — Furnishing of audit report for claiming deduction under section 46 or 138 or 139 or 140 or 141 or 142 or 143 or 144 — on reading the rule
Rule 165 — Furnishing of updated return of income under section 263(6) read with sub-section (2) of said section — on reading the rule
Rule 166 — Conditions for treating a return as defective return under section 263(7) — on reading the rule
Rule 333 — Electronic payment of tax, interest, fee and penalty — on reading the rule
A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.
Circular No.15/2025 — Extension of timelines for filing of various reports of audit and income tax returns ITRS for the assessment year 2025 26 2025-10-29
Circular No. 2/2025 — Extension of due date for filing of form no. 56F under the income tax act 1961 2025-02-18
Circular No. 5/2021 — Order under section 119 of the income tax act 1961 2021-03-25
Circular No. 19/2020 — Condonation of delay under section 119 2 b of the income tax act 1961 in filing of form no. 10BB for assessment year 2016 17 and s 2020-11-03
Circular No. 10/2020 — Order under section 119 of the income tax act 1961 regarding reporting requirement under clause 30C and clause 44 of the form 3CD 2020-04-24
ORDER [F.NO.225/72/2010/ITA-II] — Section 119 of the income-tax Act, 1961 - Central Board of Direct Taxes - Instructions to subordinate authorities - Extension of d 2011-09-30
Circular No. 5/2007 — New Return Forms for Assessment Year 2007-08 – matters connected thereto – reg 2007-07-26
Circular No. 3/2007 — Acceptance of Returns of Income/ Fringe Benefits in Paper Form for Assessment Year 2007-08 in Case of Firms Liable to Audit under 2007-05-25
Circular No. 3 — 414. Filing of Audit Report under sections 44AD(6), 44AE(7) and 44AF(5) of the Income-tax Act, 1961, for the assessment year 1998- 2001-02-09
Circular No. 628 — Clarification regarding penalty under section 271B for failure to comply with provisions of section 44AB for assessment year 1985- 1992-03-06
Circular No. 582 — Clarification regarding penalty under section 271B for failure to comply with provisions of section 44AB for assessment year 1985- 1990-10-23
Circular No. 561 — 407. Compulsory audit - Tax audit in case of companies have accounting year other than financial year 1990-05-22
Circular No. 452 — Section 44AB l Audit of Accounts of Certain Businessmen or Professionals 1986-03-17
Circular No. 422 — Clarification regarding penalty under section 271B for failure to comply with provisions of section 44AB for assessment year 1985- 1985-06-19
A notification is made under a power the Act gives and, within that power, is law. These too were made under the 1961 Act and are placed here by the department’s concordance.
Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 63. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.
Price Waterhouse Coopers Pvt Ltd v CITSupreme CourtHelps taxpayertagged s.44AB You forgot to add back something your own audit report flagged. Is that concealment?
Sahara India (Firm) v CITSupreme CourtCuts both waystagged s.44AB The AO ordered a special audit of my books without hearing me first. Is that direction valid?
T.D. Venkata Rao v Union of IndiaSupreme CourtHelps departmenttagged s.44AB I am a registered income-tax practitioner under s.288(2). Can I sign a tax audit report?
Ankit Agarwal v PCCITHigh CourtHelps taxpayertagged s.44AB My 148A notice says I never filed a return, but I did. Is that enough to get it quashed?
Chavakkad Service Co-operative Bank v ITOHigh CourtHelps taxpayertagged s.44AB Our audit report was late because the statutory auditor was late. Can the officer still levy the s.271B penalty?
Banwari Sitaram Pasari HUF v ACITITATHelps taxpayertagged s.44AB The officer has added up my whole commodity contract value as turnover and penalised me under s.271B. Is contract value turnover?
Haresh Ghanshyamdas Makhija v ITOITATHelps taxpayertagged s.44AB They already penalised me under 271A for keeping no books. Can they levy 271B on top?
Lokesh Kumar Sharma v ITOITATHelps taxpayertagged s.44AB I never maintained books at all. Can they penalise me under 271B for not getting them audited?
Somnath Ghosh v ITOITATHelps taxpayertagged s.44AB I kept no books at all. Can they penalise me under 271B for not getting the accounts audited?
What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.
