Who Needs to File Form 26 in India? Tax Audit Rules, Thresholds and New Reporting Areas

India’s new Income Tax Act 2025 and Income Tax Rules 2026 introduce Form No. 26 as the new tax audit report and statement of particulars. The form consolidates the earlier tax audit reporting framework comprising Forms 3CD, 3CA, and 3CB.

While Form 26 retains the core tax audit disclosures traditionally covered by Form 3CD, it introduces a more structured, schedule-based, and digitally oriented reporting framework.

What is Income Tax Form 26?

Form 26 is used to furnish information required for a tax audit under Section 63 of the Income Tax Act 2025.

The new tax form, divided into four parts (A, B, C, and D), provides India’s tax authorities with structured information on a taxpayer’s business or professional activities, books of account, income, expenses, deductions, tax compliance, and other relevant particulars.

The substantive tax audit disclosures are primarily contained in Parts A and B, covering areas such as:

• General taxpayer information
• Books of account and accounting methods
• Income and receipts
• Expenses and disallowances
• Prior-period items
• Losses, depreciation, and deductions
• International taxation
• Tax deducted at source (TDS) and tax collected at source (TCS)
• Indirect taxation
• Quantitative and inventory details
• Other prescribed tax and statutory particulars

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How does Form 26 replace Forms 3CD, 3CA, and 3CB?

Under the earlier tax audit framework, the reporting requirements were divided among three forms:

1. Form 3CD contained the detailed statement of tax-related particulars
2. Form 3CA was used where the taxpayer’s accounts were audited under another law
3. Form 3CB was used where the taxpayer’s accounts were not audited under another law

Form 26 brings these requirements together within a single reporting framework:

Form 26	Earlier form	Purpose
Parts A and B	Form 3CD	Statement of detailed tax audit particulars
Part C	Form 3CA	Audit report where accounts are audited under another law
Part D	Form 3CB	Audit report where accounts are not audited under another law

Source: Income Tax Department, Ministry of Finance, Government of India

Accordingly, Form 26 should be viewed as a consolidated tax audit form, rather than simply a renumbered version of Form 3CD.

Who needs to furnish Form 26?

Form 26 applies to taxpayers subject to a mandatory tax audit under Section 63.

For businesses, a tax audit is required where total sales, turnover, or gross receipts exceed:

1. INR 10 million during the tax year
2. INR 100 million, where cash receipts do not exceed 5 per cent of total receipts and cash payments do not exceed 5 per cent of total payments.

For professionals, the tax audit threshold specified in the applicable provisions is INR 5 million of gross receipts during the tax year.

Presumptive taxation

Taxpayers covered by certain presumptive taxation provisions may also become subject to a tax audit where they do not satisfy the conditions for continuing under the presumptive taxation regime.

This may include cases where a taxpayer declares profits below the amount prescribed under the applicable presumptive taxation provisions. A taxpayer who opts out of the presumptive taxation scheme during the specified lock-in period may also become subject to tax audit where the applicable conditions are met.

What are the new reporting areas under Form 26?

Form 26 places greater emphasis on digital records, data traceability, and specific tax-risk areas.

Accounting software and data storage

The reporting framework requires information on the accounting software used by the taxpayer, along with relevant cloud and data-storage arrangements. These disclosures are intended to improve the traceability and reliability of accounting data.

Cloud and offshore data

Form 26 captures information relating to the country where accounting data is stored and the availability of India-based backup servers. This provides greater visibility into the taxpayer’s accounting-data environment.

Prior-period items

Prior-period items are separately reported, providing greater visibility into the timing of income and expenses and helping tax authorities assess the tax treatment of items relating to earlier periods.

Foreign remittances

The form records information relating to foreign remittances reported through the relevant Form 15CA during the tax year. This includes the nature of the remittance and whether it is taxable or non-taxable. This strengthens reporting of cross-border payments and their tax treatment.

Minimum Alternate Tax credit

Form 26 includes year-wise information on MAT credit entitlement, utilisation, and carry-forward, helping improve visibility over credit claims and their utilisation.

How does Form 26 change tax audit reporting in India?

The new framework is not limited to introducing additional disclosures. It also seeks to make certain areas of tax audit reporting more focused and proportionate.

1. Depreciation reporting: Depreciation reporting is structured around whether an asset was used for more than 180 days or 180 days or less, rather than requiring detailed reporting based on the exact date each asset was put to use.
2. Goods and services tax (GST) reporting: GST-related reporting is more focused, with the form requiring a defined break-up of relevant information rather than extensive transaction-level or tax-component-level disclosures.
3. Employee’s State Insurance (ESI) reporting: ESI reporting is focused on disallowable amounts, rather than requiring extensive employee-wise or month-wise information in the tax audit report.

What documents should businesses prepare for Form 26?

Businesses subject to tax audit should provide the tax auditor with the records and supporting documentation required to complete the relevant sections of Form 26. These may include:

1. Books of account
2. Balance sheet
3. Profit and loss account or income and expenditure account
4. Notes to accounts
5. Statutory audit report and audited financial statements, where applicable
6. Supporting documents and workings for Form 26 disclosures
7. TDS/TCS records, returns, challans, and reconciliations
8. GST records and reconciliations
9. Quantitative and inventory records for trading and manufacturing businesses, where applicable

How should businesses prepare for tax audit under Form 26?

Businesses transitioning from the earlier Form 3CD-based process should update their tax audit preparation and documentation processes, rather than simply carrying forward existing checklists.

They should:

1. Map existing tax audit information to Form 26 and identify the relevant parts and schedules.
2. Update tax and accounting checklists to reflect the new reporting requirements.
3. Review accounting software and data-storage arrangements to ensure the required information is readily available.
4. Prepare supporting schedules and documentation before the tax audit begins.
5. Reconcile TDS/TCS and GST information with accounting records and tax filings.
6. Maintain quantitative and inventory records where applicable.
7. Track prior-period items separately to facilitate accurate reporting.
8. Review foreign-remittance information, including relevant Form 15CA disclosures.
9. Coordinate with the tax auditor on the information, schedules, and supporting documents required for Form 26.

Overall impact

The new Income Tax Form 26 represents a shift from the earlier Form 3CD-centred reporting process to a consolidated and digitally structured tax audit framework for businesses operating in India. While many of the underlying tax audit disclosures remain familiar, companies must adapt their internal records, reconciliations, and audit-preparation processes to accommodate the new schedules and data requirements.