Form No. 26

The Consolidated Tax Audit Report Under the Income-tax Act, 2025

A Clause-by-Clause, Point-Wise Guide With Illustrative Examples

Prescribed under Section 63 of the Income-tax Act, 2025, read with Rule 47 of the Income-tax Rules, 2026

Form No. 26 is the audit report and statement of particulars prescribed under Section 63 of the Income-tax Act, 2025, read with Rule 47 of the Income-tax Rules, 2026. It is intended to replace the erstwhile Forms 3CA, 3CB and 3CD that governed tax audit reporting under Section 44AB of the Income-tax Act, 1961, consolidating them into a single, unified form applicable from Tax Year 2026-27 onward.

Form No. 26 operationalises Section 63 of the Income-tax Act, 2025, which mandates audit of accounts for specified businesses and professionals, corresponding to the erstwhile Section 44AB of the 1961 Act. Rather than a mere renumbering exercise, Form No. 26 represents a structural redesign of tax audit reporting — moving from a narrative, exception-based reporting style toward a structured, schedule-driven format that is more tightly aligned with the Income Tax Return (ITR) framework and with other compliance ecosystems such as TDS/TCS reporting and GST.

In substance, Form No. 26 consolidates financial reporting, tax adjustments, compliance certifications and disclosure requirements into a single reporting instrument, and materially expands disclosure into areas that earlier received little or no attention in Form 3CD — including digital accounting infrastructure, ICDS-based computation adjustments, international tax and transfer pricing indicators, and closer integration with indirect tax (GST) data.

Form No. 26 is organised into four core parts, each serving a distinct reporting function:

This bifurcation between Part C and Part D preserves the same underlying logic as the erstwhile Forms 3CA/3CB — an assessee already subject to a statutory audit under another law is not required to undergo a duplicate audit of the same books, while an assessee with no other audit obligation requires the tax auditor to independently examine the books and form an opinion.

1. Legal name of the assessee

The full, legally correct name of the individual, firm, LLP, company or other entity as it appears in official registration records, must be stated exactly as registered — not a trade name or abbreviation unless that is itself the registered legal name.

Example: A private limited company must be described by its full name as per the Certificate of Incorporation, e.g., 'Meridian Textiles Private Limited,' not merely 'Meridian Textiles.'

2. Address with full geographic breakdown

The principal place of business or profession must be disclosed with a structured address format — building, street, locality, city, state, PIN code and, notably, a more granular geo-breakdown than the erstwhile forms required, reportedly to support automated, PAN-linked analytics.

Example: A manufacturing unit's address would be reported with each address component in its own field, rather than as a single free-text address line.

3. Permanent Account Number (PAN)

The assessee's PAN must be correctly stated and cross-verified against the PAN quoted in the return of income to avoid processing mismatches.

Example: A sole proprietor must ensure the PAN reported on Form No. 26 is the proprietor's own PAN, since a sole proprietorship has no separate PAN of its own.

4. Status of the assessee

The legal status/constitution of the assessee — individual, Hindu Undivided Family, partnership firm, LLP, company, association of persons, trust, and so on — must be correctly classified, since several downstream disclosures in Part B depend on this classification.

Example: A limited liability partnership must be reported as an LLP and not conflated with a general partnership firm, since certain clauses (for example, those relating to partner remuneration limits) apply differently to each.

5. Residential status

The assessee's residential status for the relevant tax year (resident, resident but not ordinarily resident, or non-resident) must be indicated, since this affects the scope of income reportable and certain international-tax disclosures in Part B.

Example: A company incorporated abroad but with its place of effective management in India during the year would need its residential status correctly assessed and disclosed.

6. Contact information

Current, verifiable contact details (registered email and mobile number linked to the e-filing profile) are to be captured, supporting electronic communication and validation.

Example: The email address disclosed should match the one registered on the income tax e-filing portal to avoid notice-delivery discrepancies.

7. Tax year to which the audit relates

The specific tax year (the 2025 Act's replacement terminology for 'previous year') to which the audited accounts and the report relate must be clearly stated, along with confirmation of whether the tax year represents a full twelve-month period or a shorter period (for a newly set-up business, for instance).

Example: A business commencing operations on 1 October 2026 would report a tax year running from 1 October 2026 to 31 March 2027, not a full twelve-month period.

Part B is the most substantive component of Form No. 26, reportedly spanning over 50 individual clauses organised into thematic blocks. Each block is addressed below, point by point, with a professional explanation and a worked example for each disclosure item.

4.1 General Information and Business Profile

1. Relevant clause triggering the audit

The specific statutory ground under which the audit becomes applicable must be identified — turnover/receipts exceeding the general threshold, the enhanced digital-transaction threshold, or the presumptive-scheme opt-out trigger.

Example: A professional declaring income below the presumptive rate under the professional presumptive scheme would tick the 'presumptive opt-out' trigger rather than the general gross-receipts threshold.

2. Special taxation regime elections

Any election made by the assessee for a special/concessional tax regime (for individuals, HUFs, or companies, as applicable) must be disclosed, since it affects the deductions and computation basis applied elsewhere in the report.

Example: A domestic manufacturing company opting for a concessional corporate tax rate regime would disclose this election, which in turn affects whether certain deductions reported elsewhere in Part B are actually available to be claimed.

3. Changes in partners/members during the year

Any admission, retirement or change in the profit-sharing ratio of partners (for firms/LLPs) or members (for AOPs) during the tax year must be disclosed with the effective dates, since this affects loss carry-forward continuity and remuneration-limit computations.

Example: A firm where a partner retired on 30 September and a new partner was admitted on 1 October would disclose both events with their respective effective dates and revised profit-sharing ratios.

4. Change in nature of business

Any change in the nature of the business or profession carried on during the year — a new product line, discontinuation of an activity, or a shift in the core business model — must be disclosed with an explanation.

Example: A trading business that added a manufacturing division partway through the year would disclose this expansion and its effective date.

5. Cost audit linkages

Where the assessee is separately subject to a cost audit under any other applicable law, the fact of that cost audit and a reference to the relevant report must be disclosed.

Example: A large manufacturing company subject to a statutory cost audit under company law would cross-reference that cost audit report in this disclosure.

6. Comparative turnover ratios

Certain key financial ratios (such as turnover growth, gross profit margin, and net profit margin) compared against the immediately preceding year are to be disclosed, supporting a risk-profiling function for the tax administration.

Example: A business whose gross profit margin fell sharply from 35% to 18% year-on-year would have this variance captured and would benefit from being prepared to explain the underlying reason (for instance, a one-off inventory write-down).

4.2 Books of Account and Digital Infrastructure

1. Books of account maintained (manual/digital)

The specific books maintained — cash book, journal, ledger, and any subsidiary registers — must be listed, along with whether each is maintained manually or in a digital/electronic system.

Example: A retail business maintaining its cash book and ledger entirely on cloud accounting software, with no parallel manual books, would disclose this clearly rather than describing the books only in generic terms.

2. Accounting software used

The specific accounting software or ERP system used to maintain the books must be named, reflecting the form's emphasis on digital audit-trail verification.

Example: A mid-sized manufacturer using a specific ERP package for its general ledger and a separate point-of-sale system for retail outlets would disclose both systems.

3. Cloud storage details, including IP address and country

Where books or supporting records are maintained on cloud infrastructure, the location of that infrastructure — including, where ascertainable, the IP address and the country in which the data is hosted — must be disclosed, reflecting a data-localisation and forensic-audit policy objective.

Example: A business using a cloud accounting platform hosted on servers located outside India would need to disclose the hosting country, which may in turn raise a compliance flag requiring further explanation or a data-localisation-compliant backup arrangement.

4. Compliance with backup server rules

Confirmation is required of whether the assessee complies with any prescribed rule requiring a backup of digital books to be maintained on a server located within India.

Example: A business relying solely on an overseas-hosted accounting platform without any India-based backup would need to disclose this gap, since it is reportedly a specific compliance point the form is designed to surface.

5. Location of the Indian data backup server

Where a backup is maintained in India as required, the specific location of that backup server or facility must be identified.

Example: A company maintaining its statutory backup on a data centre located in Mumbai would disclose that facility's location as part of this point.

4.3 Method of Accounting and ICDS Compliance

1. Cash or mercantile system of accounting

The method of accounting regularly employed by the assessee must be disclosed, along with confirmation of whether it has been applied consistently with the preceding year.

Example: A professional maintaining accounts on a cash basis would disclose this, and if a switch to the mercantile system occurred during the year, that change and its reason would need to be separately explained.

2. Changes in accounting method

Where the method of accounting has changed compared to the preceding year, the nature of the change and its quantified effect on profit for the year must be disclosed.

Example: A business switching from cash to mercantile accounting mid-way through its operations would need to quantify the resulting one-time adjustment to reported profit for the transition year.

3. Inventory valuation method and deviations

The method used to value closing stock (cost, net realisable value, or the lower of the two, and the specific costing convention applied) must be disclosed, along with any deviation from the method used in the preceding year.

Example: A business that valued inventory on a weighted-average-cost basis in the preceding year but switched to first-in-first-out during the current year would disclose this change and its profit impact.

4. ICDS adjustments — line-item impact reporting

The form reportedly requires detailed, schedule-based reporting of adjustments arising from each applicable Income Computation and Disclosure Standard (ICDS I through X), rather than a single, aggregated adjustment figure, converting the audit report into a structured ICDS impact statement.

Example: A construction company recognising revenue on a percentage-of-completion basis under the applicable ICDS would need to separately disclose the specific adjustment this creates between book profit and taxable income, rather than folding it into a general note.

5. Book profit versus taxable income reconciliation

A structured reconciliation between the profit as per the audited financial statements and the profit computed for tax purposes (after all ICDS and other statutory adjustments) is required, improving transparency on how the two figures diverge.

Example: Where book profit is ₹50 lakh but taxable business income after ICDS and statutory adjustments is ₹58 lakh, the ₹8 lakh difference would need to be broken down adjustment by adjustment rather than presented as a single unexplained variance.

4.4 Income Taxable but Not Credited to the Profit and Loss Account

1. Deemed dividend income

Amounts that are taxable as deemed dividend under the applicable provision (for example, certain loans or advances by a closely held company to a shareholder with substantial interest) but not credited to the profit and loss account must be separately disclosed.

Example: A closely held company advancing an interest-free loan to its majority shareholder, out of accumulated profits, would need this amount flagged as deemed dividend income even though it never passes through the company's own profit and loss account.

2. Buyback income

Income arising in connection with a buyback of shares, to the extent taxable in the hands of the relevant party but not otherwise credited to the profit and loss account, must be disclosed.

Example: A shareholder participating in a company's share buyback programme would need the taxable component of the buyback proceeds disclosed, even though this does not appear as revenue in the assessee's own trading account.

3. Subsidies received

Government subsidies or grants received during the year that are taxable but were, for accounting purposes, credited elsewhere (such as directly to a reserve rather than to the profit and loss account) must be separately disclosed.

Example: A manufacturing unit receiving a state government capital subsidy credited directly to a capital reserve in the books would still need to disclose the taxable portion of that subsidy under this point.

4. Forfeited advances

Amounts forfeited by the assessee in connection with an agreement (for example, an earnest money deposit forfeited on cancellation of a proposed asset sale) that are taxable but not routed through the profit and loss account must be disclosed.

Example: A real estate developer that forfeits a customer's booking advance on cancellation of a flat purchase agreement would disclose the forfeited sum here if it was not credited to the trading account.

5. Business trust receipts

Distributions or receipts from a business trust (such as a REIT or InvIT) that are taxable in the recipient's hands but not credited through the ordinary profit and loss account must be disclosed.

Example: An investor holding units in an infrastructure investment trust receiving a taxable distribution component would need this reported under this head if not otherwise reflected as trading income.

6. Compensation and interest on compensation

Compensation received (for example, on compulsory acquisition of a business asset) and any interest component on such compensation, to the extent taxable, must be disclosed if not credited to the profit and loss account.

Example: A business receiving compensation for compulsory acquisition of land used in operations, along with statutory interest on the delayed payment, would disclose both components separately under this point.

4.5 Property and Capital Transactions

1. Conversion of capital asset into stock-in-trade

Where a capital asset held by the assessee is converted into stock-in-trade of a business during the year, the fair market value on the date of conversion and the resulting notional gain must be disclosed, since this triggers a specific charge to tax.

Example: A landowner who converts a plot of land held as investment into inventory for a real estate development business would need to disclose the fair market value of the land as on the date of conversion, which is treated as the sale consideration for capital gains purposes.

2. Property transfers below stamp duty value

Where any property is transferred during the year for a consideration lower than the value adopted for stamp duty purposes, the variance and its tax implications must be disclosed.

Example: A business selling an office property for ₹80 lakh where the stamp duty value is ₹95 lakh would need this ₹15 lakh variance flagged, since it can trigger a deemed additional consideration for tax purposes in the hands of both parties.

3. Deemed income under negotiable instrument/hundi provisions

Amounts borrowed or repaid otherwise than through an account payee instrument, where such amounts are deemed to be income under the specific anti-cash provisions relating to hundis or similar instruments, must be disclosed.

Example: A trader who borrows a sum through a hundi (a traditional negotiable instrument) rather than through a banking channel would need this borrowing specifically flagged under this point, given its distinct deeming provision.

4.6 Expense Disallowance Matrix

1. Employer contributions to employee welfare funds

Contributions to provident fund, ESI and similar employee welfare funds must be disclosed with the due date for payment under the relevant law and the actual date of payment, since delayed payment attracts disallowance under the payment-basis rule.

Example: An employer that deducted employees' provident fund contributions in March but deposited them in the following May, beyond the due date under the PF law, would have this delay specifically flagged with the disallowance quantified.

2. Provisions debited to the profit and loss account

General or specific provisions debited to the accounts (other than those specifically permitted, such as provision for bad debts within prescribed limits) must be disclosed and tested against admissibility.

Example: A company creating a general contingency provision for potential litigation losses, without a specific, quantifiable basis, would have this provision flagged as a likely inadmissible item.

3. Bonus or commission to employees

Bonus or commission paid to employees must be disclosed, with specific attention to any component that could alternatively be characterised as profit distribution rather than a genuine business expense.

Example: A private company paying its promoter-employee an unusually large 'commission' calculated as a percentage of profits, over and above salary, would need this arrangement specifically examined and disclosed.

4. Bad debts written off

Bad debts written off during the year must be disclosed with confirmation that they were genuinely written off in the books (not merely provided for) and that the corresponding amount was earlier offered to tax as income.

Example: A business writing off a ₹5 lakh trade receivable as bad, where the ₹5 lakh sale had been credited to revenue and taxed in an earlier year, would disclose this write-off with the cross-reference to the earlier year's income.

5. Capital expenditure debited to revenue

Any capital expenditure incorrectly or borderline-debited to the profit and loss account (rather than capitalised) must be identified and disclosed for appropriate tax treatment.

Example: A business that expensed the cost of a substantial machine upgrade, which in substance created a new, enduring advantage, would need this reclassified as capital expenditure and disclosed accordingly.

6. CSR expenditure

Corporate Social Responsibility expenditure incurred under the applicable company-law mandate must be separately disclosed, since such expenditure is generally not treated as a deductible business expense for tax purposes even though it is a statutory obligation for the company.

Example: A company spending ₹40 lakh on CSR activities under its statutory obligation would disclose this amount separately, since it is disallowed in computing taxable business income notwithstanding its legal mandate.

7. Prohibited or illegal expenditure

Expenditure incurred for a purpose that is an offence, or that is prohibited by law, must be specifically identified and disclosed, since such expenditure is expressly non-deductible regardless of its business connection.

Example: A payment made to settle a matter arising from a violation of a regulatory law would need to be flagged and disallowed under this point, even if the underlying business rationale for incurring it were otherwise plausible.

8. Penalties and fines

Penalties, fines and similar payments for infraction of law must be disclosed and distinguished from genuine compensatory payments that may retain a business character.

Example: A late-filing penalty paid to a regulatory authority would be disclosed and disallowed, whereas a liquidated-damages payment under a genuine commercial contract would be analysed separately on its own facts.

9. Related-party payments

Payments made to specified/related persons must be disclosed with sufficient detail to test reasonableness against fair market value and genuine business need.

Example: A company paying rent to a director for office premises at a rate significantly above comparable local market rates would need this arrangement disclosed, inviting scrutiny of the excess over fair value.

10. MSME interest disallowance

Interest payable (or deemed payable) for delayed payment to a micro or small enterprise supplier, beyond the period specified under the applicable MSME law, must be disclosed and is not an allowable deduction.

Example: A company that delayed payment to a registered small-enterprise vendor beyond the statutory 45-day period would need the resulting interest liability disclosed and flagged as non-deductible.

11. TDS-linked disallowances

Expenditure on which tax was deductible at source but was not deducted, or was deducted but not deposited within the prescribed time, must be quantified and disclosed as a specific disallowance, cross-referenced to the detailed TDS/TCS schedule elsewhere in the form.

Example: A payment of professional fees on which TDS was not deducted at all during the year would be disclosed here with the specific disallowed amount, cross-linked to the TDS schedule showing the underlying default.

4.7 Losses, Depreciation and Deductions

1. Block-wise depreciation computation

Depreciation must be reported on a structured, block-wise basis — opening written-down value, additions, deletions, and closing written-down value for each block of assets — mirroring the schedules used in the return of income to enable direct, automated cross-validation.

Example: A business with a block of plant and machinery would report the opening WDV, the cost of assets added during the year, the sale proceeds of assets sold, and the resulting closing WDV, structured identically to the corresponding ITR schedule.

2. Additional depreciation tracking

Additional depreciation claimed on new plant and machinery by an eligible manufacturing undertaking must be separately tracked and disclosed, along with confirmation that the eligibility conditions (nature of undertaking, nature of asset, timing of acquisition) are satisfied.

Example: A manufacturing company installing a new production line in November would disclose the additional depreciation claimed on that plant, along with the installation date supporting the 180-day computation.

3. Capital gain adjustments within the block

Where the sale proceeds of assets disposed of during the year exceed the written-down value of the block, the resulting short-term capital gain (or reduction of the block, as applicable) must be disclosed.

Example: A business selling old machinery for a sum exceeding the block's written-down value would disclose the resulting short-term capital gain arising from the block computation.

4. Brought-forward loss continuity

Business losses brought forward from earlier years must be disclosed with the year of origin, the amount available, and confirmation that continuity conditions (timely filing in the loss year, and, where relevant, continuity of ownership/constitution) remain satisfied.

Example: A firm carrying forward a business loss from three years ago, following a change in one partner's share, would need to disclose the loss together with an assessment of whether the change in constitution restricts the portion attributable to the outgoing partner.

5. Speculation loss tracking

Losses from speculative transactions must be reported separately from other business losses, given the distinct, more restrictive set-off and carry-forward rules applicable to speculative losses.

Example: A trader with losses from intraday equity trading, alongside profits from delivery-based business, would report the speculative loss separately, since it cannot be set off against the non-speculative profits.

6. MAT/AMT credit utilisation

Minimum Alternate Tax (for companies) or Alternate Minimum Tax (for other specified assessees) credit available and utilised during the year must be disclosed on a structured schedule, tracking the credit's origin year and remaining balance.

Example: A company that paid MAT in an earlier loss-adjusted year and is now utilising the accumulated MAT credit against its regular tax liability would disclose the opening credit balance, the amount utilised in the current year, and the closing balance carried forward.

4.8 International Taxation

1. Transfer pricing primary adjustments

Where a primary transfer-pricing adjustment has been made (by the assessee voluntarily or by the tax authority) to align a related-party international transaction with the arm's length price, the adjustment and its year must be disclosed.

Example: A company that voluntarily adjusted its reported income upward to reflect an arm's length price for services rendered to its overseas parent would disclose the amount and basis of that primary adjustment.

2. Excess money repatriation tracking

Where a primary transfer-pricing adjustment has been made, the form tracks whether the corresponding 'excess money' (the difference between the arm's length price and the price actually charged) has been repatriated to India within the prescribed time, since non-repatriation can trigger a secondary, deemed-loan adjustment.

Example: If the excess money arising from a primary adjustment has not been repatriated within the prescribed period, the form requires disclosure of this fact, since it triggers deemed interest income on the unrepatriated amount as a secondary adjustment.

3. Thin capitalisation (interest limitation) disclosures

Where the assessee is subject to interest-limitation rules restricting the deductibility of interest paid to an associated enterprise abroad beyond a prescribed proportion of earnings, the computation and any resulting disallowance must be disclosed.

Example: An Indian subsidiary paying substantial interest to its foreign parent on an intra-group loan would need to disclose the interest-limitation computation and confirm whether any portion of the interest is disallowed under the applicable thin-capitalisation rule.

4. Foreign remittance reporting

Remittances made to non-residents during the year, and the corresponding tax-withholding compliance and reporting (via the relevant foreign remittance certification), must be cross-referenced and disclosed.

Example: A company remitting royalty payments to an overseas licensor would disclose the remittance along with confirmation that the applicable withholding certification was obtained and filed.

4.9 Financial Transaction Compliance

1. Loans and deposits beyond prescribed limits

Loans or deposits accepted or repaid otherwise than through an account payee cheque, draft or prescribed electronic mode, where the amount exceeds the prescribed limit, must be disclosed with the mode, date and amount of each transaction.

Example: A firm accepting a ₹3 lakh cash loan from a relative of a partner would need this transaction specifically disclosed, together with the resulting penalty exposure equal to the amount of the loan.

2. Cash receipt/payment violations

Cash receipts or payments exceeding the prescribed threshold, in violation of the specified restrictions, must be disclosed with the mode, code (i.e., the specific transaction category), and the peak outstanding amount where relevant.

Example: A retailer accepting a single cash sale of ₹2.5 lakh from one customer in a day would need this transaction disclosed as a violation of the cash-receipt restriction, along with the consequential exposure.

3. Specified Financial Transaction (SFT) reporting obligations

Where the assessee is separately obligated to file Statements of Financial Transactions (high-value transactions reportable to the tax department by specified reporting entities), compliance with that filing obligation must be confirmed.

Example: A company that issued high-value dividends or accepted large fixed deposits triggering an SFT filing obligation would confirm, in this disclosure, that the corresponding SFT return was filed correctly and on time.

4. Unquoted share transactions

Transactions involving the issue or transfer of unquoted equity shares, including the valuation methodology applied and the fair market value determined, must be disclosed, particularly where consideration received exceeds (or is less than) the determined fair value.

Example: A closely held company issuing shares to a new investor at a premium would disclose the valuation report and methodology (such as the discounted cash flow method) used to justify the issue price relative to face value.

5. Deemed dividend loan reporting

Loans or advances made by a closely held company to a shareholder holding a substantial interest, or to a concern in which such a shareholder has a substantial interest, must be disclosed given the deemed-dividend consequence such loans can trigger.

Example: A company advancing funds to a sister concern owned by its majority shareholder, out of its accumulated profits, would need this loan disclosed and evaluated for deemed-dividend characterisation.

4.10 TDS/TCS Reporting Analytics

1. Payments liable for TDS/TCS

Every category of payment or receipt attracting a tax-deduction or tax-collection obligation must be listed, with the applicable section, rate, and the amount involved, moving from a summarised disclosure toward transaction-level analytics.

Example: Professional fees, contractor payments, rent, and commission paid during the year would each be separately listed with the specific withholding provision applicable to that category of payment.

2. Short or non-deduction of tax

Instances where tax was not deducted at all, or was deducted at a rate lower than required, must be quantified and disclosed, distinguishing between the two categories since their consequences differ.

Example: A payment where TDS was deducted at 2% instead of the correct 10% rate would be disclosed as a short-deduction case, distinct from a payment where no TDS was deducted at all.

3. Late deposit and resulting interest

Where tax was correctly deducted but deposited with the government beyond the prescribed due date, the delay and the resulting interest liability must be quantified and disclosed.

Example: TDS deducted in January but deposited only in April, well beyond the prescribed due date, would have the resulting interest liability computed and disclosed under this point.

4. Disallowance for TDS default

The specific expenditure disallowance triggered by a TDS default (non-deduction or non-deposit within time) must be quantified, cross-referenced to the general expense disallowance matrix discussed earlier.

Example: A ₹10 lakh contractor payment on which TDS was never deducted would have the corresponding disallowance (generally a specified percentage of the payment) computed and cross-referenced here.

5. TDS/TCS statement filing status

Confirmation of whether the corresponding quarterly TDS/TCS statements were filed, and whether they were filed within the prescribed due dates, must be disclosed, since delayed filing carries its own separate fee and penalty consequences distinct from the underlying deduction default.

Example: A business that deducted and deposited TDS correctly but filed its quarterly TDS statement two months late would disclose this filing delay separately from any deduction-related default.

4.11 GST and Indirect Tax Linkage

1. GST registration numbers

Every GST registration (GSTIN) held by the assessee across different states or business verticals must be disclosed, supporting cross-referencing between direct and indirect tax records.

Example: A business operating warehouses in three states, each separately registered under GST, would disclose all three GSTINs rather than only the principal registration.

2. Expenditure split between registered and unregistered vendors

The proportion of purchases or expenses sourced from GST-registered suppliers versus unregistered suppliers must be disclosed, supporting cross-verification of input tax credit claims and unregistered-supplier exposure.

Example: A business with 90% of its purchases from registered vendors and 10% from small, unregistered local suppliers would disclose this split, which the department can cross-check against GST return data.

3. Composition scheme suppliers

Purchases made from suppliers registered under the GST composition scheme must be separately identified, since such purchases do not carry eligible input tax credit for the recipient.

Example: A retailer purchasing goods from a small composition-scheme supplier would flag this purchase category separately, since no input tax credit is available on it notwithstanding GST being embedded in the price.

4. Exempt supplies

Outward supplies made by the assessee that are exempt from GST must be disclosed, supporting reconciliation between GST turnover and the turnover reported for income tax purposes.

Example: A business supplying both taxable goods and GST-exempt agricultural produce would disclose the exempt-supply turnover separately to explain any variance between its GST-taxable turnover and its total income-tax turnover.

4.12 Quantitative Details

1. Opening stock, purchases, sales and closing stock

For trading and manufacturing concerns, quantitative details (in units, not merely value) of opening stock, purchases, sales and closing stock of principal items must be disclosed, reviving the stock-audit discipline associated with detecting profit suppression.

Example: A textile trader would disclose the opening and closing stock quantity (in metres) of each principal fabric category, alongside the corresponding purchase and sale quantities for the year, not merely the aggregate rupee values.

2. Raw material consumption

For manufacturing concerns, the quantity of principal raw materials consumed during the year must be disclosed, supporting a yield and efficiency cross-check against production output.

Example: A food-processing unit would disclose the quantity of principal raw material (say, wheat) consumed during the year, which the department can cross-reference against the quantity of finished product declared.

3. Production yield percentage

The yield percentage — finished output as a proportion of raw material input — must be disclosed and compared against industry norms or the assessee's own historical trend.

Example: A unit reporting a sudden drop in yield percentage compared to the preceding year, without a corresponding explanation (such as a change in raw material quality), would attract specific scrutiny attention on this point.

4. Shortage or excess in stock

Any shortage or excess identified on physical verification of stock, compared to book quantities, must be disclosed along with the auditor's assessment of the reason.

Example: A manufacturer identifying a 2% shortage in raw material stock upon physical count, attributed to normal wastage in the production process, would disclose both the shortage and the explanation.

5. Principal items classification

Only the principal items of goods traded or manufactured need be reported in full quantitative detail, with a reasonable, disclosed basis for what has been treated as 'principal' for this purpose.

Example: A business dealing in hundreds of small stock-keeping units might reasonably treat only its top revenue-generating product categories as 'principal items' for this disclosure, with the basis for that selection documented and disclosed.

Parts C and D together constitute the auditor's formal opinion, mirroring the erstwhile Form 3CA (where the assessee is separately audited under another law) and Form 3CB (where the tax audit is the only audit performed). Both require the following common elements, addressed point by point below.

1. Confirmation of audit procedures performed

The auditor must confirm that the audit was conducted in accordance with applicable auditing standards and that sufficient, appropriate audit evidence was obtained to support the opinion and the particulars disclosed in Part B.

Example: An auditor relying on statistical sampling to verify a large volume of sales invoices would document the sampling methodology applied as part of the evidence supporting this confirmation.

2. Reference to the audit conducted under another law (Part C only)

Where Part C applies, the auditor must specifically reference the statutory audit report issued under the other applicable law (such as the Companies Act), including its date, and confirm reliance on that audit for the underlying financial statements.

Example: A tax auditor relying on a company's statutory audit completed under company law would reference that report's date and the statutory auditor's opinion as the basis for the Part C certification.

3. Independent true-and-fair opinion (Part D only)

Where Part D applies, since no other statutory audit exists, the tax auditor must independently express an opinion on whether the balance sheet and profit and loss account give a true and fair view, based on the auditor's own direct examination of the books.

Example: A sole proprietorship with no other audit requirement would have its tax auditor directly examine the books and independently form the true-and-fair opinion, rather than relying on any other report.

4. Impact of qualifications on taxable income

Any qualification, exception, or adverse observation the auditor records must be specifically quantified in terms of its impact (if any) on the computation of taxable income, rather than left as a general, unquantified caveat.

Example: Where an auditor qualifies the report for inadequate stock records, the qualification should indicate, where estimable, the potential understatement or overstatement of profit that could result, rather than a bare statement that records were inadequate.

5. Clause-wise qualification tagging

Each qualification must be specifically tagged to the individual clause or point in Part B to which it relates (reportedly supporting a tagging range across the full clause set of the form), rather than expressed as a general remark at the end of the report.

Example: An auditor unable to verify the fair market value used for an unquoted share issue would tag the qualification specifically to that clause in the financial-transaction-compliance block, rather than bundling it into a generic closing paragraph.

6. Basis of audit evidence disclosed

For each material area of the report, the auditor must indicate the basis on which the underlying information was verified — full test-check, reliance on management representation, or an express statement of inability to verify — improving transparency about the depth of verification actually performed.

Example: For a related-party transaction where market comparables were unavailable, the auditor might disclose reliance on management representation as the basis, rather than a full independent test-check, and flag this basis explicitly.

6. Illustrative Clause Correspondence — Form 3CD to Form No. 26

The table below sets out the reported correspondence between selected clauses of the erstwhile Form 3CD and their counterparts in the draft Form No. 26, based on available professional commentary. As noted at the outset, these clause numbers should be treated as indicative of the draft structure and verified against the final notified form.

1. Confirm the final notified form before the audit season

Given the draft status of the form at the time of writing, confirm the finally notified version of Form No. 26 — including its clause numbering and any schedules — well ahead of the filing season rather than assuming the draft structure will be adopted unchanged.

Example: A firm building its audit-working-paper templates around the draft clause numbers should build in a review checkpoint to update those templates once the final form is notified.

2. Invest early in digital-infrastructure documentation

Given the new emphasis on accounting-software, cloud-storage and backup-server disclosures, compile this information (software names, hosting locations, backup arrangements) well before the audit begins, since it is often held by an IT function rather than accounts personnel.

Example: A business should request its IT team to document the hosting country and backup arrangement for its accounting platform at the start of the year, rather than scrambling to obtain this information during the audit itself.

3. Build ICDS working papers contemporaneously

Given the shift toward line-item ICDS impact reporting, maintain a running ICDS adjustment working paper through the year rather than attempting to reconstruct the full adjustment schedule retrospectively at year-end.

Example: A construction company should update its percentage-of-completion ICDS working paper at each reporting milestone during the year, rather than compiling the entire year's adjustment in a single exercise after year-end.

4. Strengthen TDS transaction-level tracking

Given the shift from summary to transaction-level TDS/TCS analytics, maintain a payment-by-payment TDS tracker throughout the year, reconciled monthly against actual deposits and returns filed.

Example: A business should reconcile its TDS ledger against actual challan payments every month, rather than only at year-end, to avoid discovering a large volume of unexplained short-deductions during the audit.

5. Coordinate GST and income-tax reconciliation proactively

Given the closer GST-linkage disclosures, reconcile GST turnover against financial-statement turnover on an ongoing basis, rather than treating this as a one-time, year-end exercise.

Example: A business should reconcile its monthly GST returns against its management accounts turnover each quarter, addressing any variance while the underlying transactions are still fresh and easily traceable.

6. Document transfer-pricing and international-transaction positions early

Given the expanded international-tax disclosures, ensure transfer-pricing documentation, benchmarking studies, and evidence of excess-money repatriation (where applicable) are finalised well before the tax-audit engagement begins, since these disclosures now sit directly within the tax audit report itself rather than only in a separate transfer-pricing report.

Example: A company with related-party imports from its overseas parent should finalise its arm's-length benchmarking study before the tax audit commences, so the primary-adjustment and repatriation disclosures can be completed without delay.

This guide has been prepared for general professional-education purposes based on publicly available commentary on the Draft Form No. 26 released with the Draft Income-tax Rules, 2026, current as of July 2026. The clause numbering, thematic structure and specific disclosure fields described above reflect the draft form as reported in professional commentary and are subject to change before final notification. Section numbers, thresholds, clause references and form structure should be independently verified against the finally notified Form No. 26, the enacted Income-tax Rules, 2026, and applicable CBDT circulars and instructions before being relied upon for an actual audit engagement, filing, or professional opinion. This content does not constitute professional or legal advice.