The Central Board of Direct Taxes (CBDT) has unveiled Draft Form 26, introducing a revamped audit reporting format under the Income Tax Act, 2025. The proposed form is set to become a central compliance document for taxpayers whose accounts are subject to audit under the new law.
The draft signals a significant shift toward structured disclosures, standardised reporting, and enhanced transparency in tax audits, aligning compliance requirements with the modernised framework of the 2025 legislation.
Who Will Be Required to File Form 26?
Draft Form 26 applies to two broad categories of taxpayers engaged in business or profession:
- Those already subject to audit under any other law (such as the Companies Act or other regulatory statutes), and
- Those not covered under any other statutory audit requirement but falling within the audit thresholds prescribed under the Income Tax Act, 2025.
Depending on the applicable category, taxpayers will be required to furnish Part A and Part B, along with either Part C or Part D, as relevant.
Structured Compliance Framework
The draft form is divided into clearly demarcated sections to streamline reporting and ensure uniformity:
Part A – Basic Particulars
This section captures foundational details of the taxpayer, including name, address, PAN, legal status, residential status, contact information, and the relevant tax year.
Part B – General Business Information
Taxpayers must disclose the specific clause of Section 63 under which the audit is being conducted. The section also requires information about the nature of business or profession and whether presumptive taxation provisions have been opted for during the year.
Part C / Part D – Audit-Specific Reporting
These sections are tailored based on whether the taxpayer is already subject to audit under another law. The design avoids a uniform reporting structure and instead ensures category-specific disclosures aligned with the taxpayer’s regulatory profile.
Emphasis on Transparency and Detailed Disclosures
One of the key highlights of Draft Form 26 is its focus on audit traceability and clarity regarding the applicability of statutory requirements. The form calls for detailed disclosures relating to:
- Partner or member details in the case of firms, LLPs, or associations
- Changes in profit-sharing ratios during the tax year
- Modifications in the nature of business or professional activities
- Applicability of presumptive taxation schemes
The granular reporting framework reflects the government’s broader objective of strengthening compliance architecture and minimising interpretational gaps under the new Act.
Implications for Taxpayers and Auditors
The introduction of Draft Form 26 will require both taxpayers and professionals to recalibrate their compliance processes.
- Auditors must familiarise themselves with the revised reporting structure and ensure accurate mapping of disclosures to Section 63 of the Income Tax Act, 2025.
- Businesses with multiple lines of activity will need to maintain more detailed internal records to meet expanded disclosure obligations.
- Firms and LLPs must pay particular attention to partner-level data and year-on-year structural changes, as these now form part of formal audit reporting.
- Taxpayers opting for presumptive taxation may also need to provide additional contextual information under the new framework.
The move is widely seen as part of a broader effort to modernise audit documentation and align it with data-driven tax administration practices.
Draft Open for Public Comments
CBDT has released the draft for stakeholder consultation and invited feedback before final notification. Once finalised, Form 26 will replace legacy audit reporting formats under the previous income tax regime and serve as the principal audit compliance document under the Income Tax Act, 2025.
Tax professionals, industry bodies, and businesses are expected to closely examine the draft, as its final version will shape the future of tax audit reporting in India.
