Tax Audit

The Central Board of Direct Taxes (CBDT) has extended two key due dates for Assessment Year 2026-27 (the financial year ended 31 March 2026). The extension is in Circular No. 07/2026 dated 28 September 2026 (F. No. 225/128/2026/ITA-II). It gives taxpayers whose accounts must be audited about three more weeks for the audit report and for the return.

The new dates at a glance

The circular is issued under Section 119 of the Income-tax Act, 1961, read with Section 536 of the Income-tax Act, 2025. Although the new Act has been in force since 1 April 2026, returns and audit reports for FY 2025-26 are still governed by the 1961 Act. Section 536 of the new Act preserves this.

Who is covered

Tax audit report. The extension applies to the report of audit under Section 44AB, through clause (ii) of the Explanation to that section. In practice, this covers every business or professional whose accounts must be audited for FY 2025-26 under the Income-tax Act.

Return of income. The extended return date applies to the persons referred to in serial number 2 of the table below Explanation 2 to Section 139(1), whose normal due date is 31 October. Broadly, these are companies, taxpayers whose accounts must be audited, and certain partners of such firms.

Not covered. The circular does not change the due date for other taxpayers, such as salaried individuals and other non-audit cases. It also does not mention cases that must file a transfer pricing report, whose due date is different. Check the date that applies to such cases separately.

What the extension means in practice

1. A timely return is still a return under Section 139(1). A return filed by 21 November 2026 is filed within the extended due date. This matters because several benefits depend on filing on time. For example, carry forward of business losses and capital losses generally requires the return to be filed within the due date.

2. Audit before return. The return of an audit case must be supported by an audit report that has already been uploaded and accepted by the taxpayer on the e-filing portal. The new gap between the two dates (21 October and 21 November) mirrors the usual one-month gap. Plan the audit sign-off first and the return later.

3. Late-filing consequences after the extended dates. Missing the extended dates attracts the usual consequences under the 1961 Act:

• Penalty for not getting accounts audited or not furnishing the report (Section 271B): 0.5% of total sales, turnover or gross receipts, subject to a maximum of ₹1,50,000. The penalty is not levied where there is reasonable cause (Section 273B).
• Fee for belated return (Section 234F): ₹5,000, or ₹1,000 where total income does not exceed ₹5 lakh.
• Loss of certain benefits that depend on timely filing, such as carry forward of most losses.

4. Interest is a separate question. The circular extends due dates. It does not say anything about interest under Sections 234A, 234B or 234C. Where tax is payable with the return, the safer course is to pay self-assessment tax early rather than wait for the extended date. Check the interest position with your tax adviser for your specific case.

A checklist for the extra three weeks

• Finalise the books for FY 2025-26 and reconcile them with Form 26AS, AIS and TIS.
• Reconcile GST turnover (GSTR-1 and GSTR-3B) with the turnover in the books and in the audit report.
• Check TDS/TCS compliance, since disallowances for non-deduction flow into the audit report.
• Collect the confirmations, stock statements and fixed asset details the auditor will need for Form 3CD.
• Review payments to MSME suppliers that are outstanding beyond the time allowed under the MSMED Act, which affect the deduction for those payments under Section 43B(h) of the 1961 Act.
• Once the audit report is uploaded, accept it from the taxpayer's login promptly, since the return cannot be filed until it is accepted.
• Compute the tax liability early and pay any self-assessment tax before filing.

Looking ahead: the Income-tax Act, 2025

From tax year 2026-27 (FY 2026-27), audits and returns will be governed by the Income-tax Act, 2025, under which the tax audit provision is Section 63. Next year's due dates, forms and section references will follow the new Act. The circular itself shows how the two Acts work together during the transition.

The information in this article reflects the law as on the date of publication and is for general guidance only.

Sources: https://incometaxindia.gov.in/documents/d/guest/circular-7-2026-pdf · https://newsonair.gov.in/cbdt-extends-i-t-return-filing-deadline-for-audit-cases-to-november-21/