What are the types of internal audits?

Internal audits can include operational audits, compliance audits, financial audits, forensic audits, IT audits, and environmental audits.

What are the key standards in internal audits?

The key standards include independence, objectivity, proficiency, quality assurance, and communication.

What is the risk-based approach in internal audits?

The risk-based approach prioritizes auditing high-risk areas within an organization to focus resources where they are needed most.

What are the 5 C's of internal audit?

The 5 C's are Control, Compliance, Cost, Consistency, and Communication, which are critical for a successful audit process.

How does an internal audit help in risk management?

Internal audits help identify and mitigate risks by ensuring that internal controls are effective and that the company complies with laws and regulations.

Understanding the Tax Audit Process in India

Published on June 2, 2025

Tax compliance in India isn’t just about filing returns—it’s also about ensuring those returns meet regulatory standards. This is where tax audits come into play. For businesses and professionals with turnover or gross receipts exceeding specific thresholds, understanding the tax audit process in India is essential.

At Felix Advisory, we help businesses navigate the tax audit process in India. In this blog, we explain what tax audits are, who they apply to, how tax audits are conducted and what you should expect—along with timelines and reporting responsibilities.

What Is a Tax Audit?

A tax audit is an examination of a taxpayer’s financial records to verify the correctness of income tax returns filed. Mandated under Section 44AB of the Income Tax Act, 1961, it ensures that entities maintain proper books of accounts and follow the law.

Read our guide on Comprehensive Tax Consulting Services

Who needs to get a tax audit?

To answer the question “Who Is Required to Get a Tax Audit Done?” Here’s a quick reference table:

Category	Threshold for Tax Audit
Business	Gross receipts > ₹1 crore (₹10 crore if digital)
Profession	Gross receipts > ₹50 lakhs
Presumptive Tax Scheme (44AD/44ADA)	If declared income < deemed profit rate

Why Tax Audit Is Required?

To ensure accuracy in filing income tax returns.
To verify that proper books are maintained.
To reduce the possibility of income tax queries.
To promote compliance and align practices in line with generally accepted tax practices.

A tax audit helps to streamline the records for accuracy and helps in detecting errors or noncompliance pertaining to income tax requirements.

The firm, like Felix Advisory, not only conducts tax audits, but also ensures that your practices are inline with tax requirements and suggest compliant ways for transactions. In addition our tax team supports the client in case any representation or clarification is given to the tax department for such transactions.

How Is the Tax Audit Conducted?

Let us explore how tax audit is done or what happens in a tax audit

The tax audit procedure in India follows a structured approach:

Step-by-Step Tax Audit Programme:

Step	Description
Engagement	Appointment of a Chartered Accountant (CA)
Record Review	Examination of ledgers, trial balance, purchase/sales invoices
Verification	Cross-checking of TDS returns and reconciliations
Report Preparation	Tax audit report is prepared in Form 3CA/3CB and Form 3CD
Filing	Audit report submitted electronically on Income Tax Portal

Tax Audit Date Be Extended?

The deadline to file a tax audit report is generally 30th September of the assessment year. However, extensions are occasionally announced by the CBDT (Central Board of Direct Taxes).

FAQs

What Happens in a Tax Audit?
The auditor checks records for accuracy, ensures compliance with tax laws, and identifies any discrepancies.
How Is Tax Audit Done?
It’s conducted by a qualified CA who prepares and submits Form 3CD along with other required schedules.
Why Is Tax Audit Important for Businesses?
It provides credibility to your financials and ensures you’re tax-compliant, which helps avoid penalties.

Explore our full suite of Audit and Assurance Services to keep your business ahead of compliance mandates.

Final Say

The tax audit process in India is a vital mechanism for ensuring transparency and fairness in the tax system. By partnering with experts like Felix Advisory, you can not only remain compliant but also gain insights into financial best practices.

Felix Advisory is a Full service professional firm with 350 team members and 5 offices in India. We are specialized in Advisory, Tax & Accounting Services with 24 partners with more than 20 years experience, including experience with Big4 in India as well as abroad. We are currently working with MNC, Indian Businesses & Startup across industry.