1️⃣ Introduction
The Institute of Chartered Accountants of India (ICAI) has once again demonstrated its proactive approach in safeguarding audit quality by revisiting the ceiling on the number of tax audits a Chartered Accountant or a firm can undertake. In a major development reported by CAclubindia on 13th June 2024, the ICAI Council has decided that **effective from Financial Year 2026–27 (Assessment Year 2027–28), the number of tax audit assignments under Section 44AB that can be accepted by a member will be capped at 60 audits per partner, reduced from the current limit of 60 per member and inclusive of firm limits.
This move aligns with global best practices for audit capacity management and is expected to improve audit diligence and compliance quality. This article analyses the change in depth, referencing applicable provisions under the Income Tax Act, 1961, ICAI Guidelines, relevant circulars, and its practical impact on the profession and taxpayers.
2️⃣ Tax Audit under Income Tax Act: A Quick Recap
📌 What is a Tax Audit?
A tax audit, governed by Section 44AB of the Income Tax Act, 1961, is a compulsory audit to ensure accuracy of income declarations, claims, and statutory compliance for certain categories of taxpayers.
Mandatory Tax Audit Scenarios:
As per Section 44AB:
- Business: If turnover/gross receipts exceed ₹1 crore (normal limit) or ₹10 crore if cash transactions do not exceed 5% (amended by Finance Act, 2020).
- Profession: If gross receipts exceed ₹50 lakhs.
- Presumptive Taxation: If a taxpayer under Sections 44AD, 44ADA, 44AE declares profit lower than deemed profit limits.
Key Deliverable:
Form 3CA/3CB & 3CD must be filed with the Income Tax Department within the prescribed due date.
3️⃣ ICAI Guidelines on Tax Audit Assignments: Evolution
📜 Historic Background
- To prevent overburdening and to maintain audit quality, ICAI had set a cap of 45 tax audits per member, which was later enhanced to 60 per member.
- In practice, this means a practicing CA, whether in a firm or solo, cannot accept more than 60 tax audits in a year under Section 44AB, excluding audits of partners’ own firms or LLPs.
📜 Relevant ICAI Provisions
- Clause 6 of Part I of First Schedule, Chartered Accountants Act, 1949: Prohibits soliciting work beyond reasonable professional capacity.
- Council Guidelines No. 1-CA(7)/02/2008, effective from 1st April 2008: Lays down the current limit.
- Certain audits are excluded from the ceiling, e.g. statutory audits of companies under the Companies Act, audits under other laws (GST, Societies, Trusts).
📜 Supreme Court Precedent
In the past, this limit was challenged but upheld to be a reasonable professional standard within ICAI’s disciplinary control.
**4️⃣ The New Council Decision — 60 per Partner, Not per Member
✅ What Changed?
Effective FY 2026–27:
- The ceiling will be firm-based, but determined as 60 audits per partner.
- For example:
- Single partner firm: 60 audits only.
- Two partner firm: 120 audits collectively.
- Five partner firm: 300 audits maximum.
This move ensures audit work is evenly distributed and discourages single-partner firms from accepting excessive assignments.
**5️⃣ Implications for Practitioners and Firms
📌 A. Quality over Quantity
- ICAI aims to align capacity with genuine ability to deliver quality.
- Prevents thinly spread attention over large audit volumes.
📌 B. Firm Structuring
- Small firms may be encouraged to add genuine partners.
- Puppet partner structures may attract disciplinary scrutiny.
📌 C. Impact on Sole Proprietors
- Sole proprietors now strictly limited to 60 audits.
- Many sole practitioners who handle large volumes will need to reorganise or merge with bigger firms.
📌 D. Avoiding Regulatory Breaches
- Breach of ceiling is a professional misconduct under Clause 1 of Part II of Second Schedule.
- May attract disciplinary action.
**6️⃣ Practical Scenarios
| Firm Type | No. of Partners | Permissible Tax Audits (44AB) |
|---|---|---|
| Sole Proprietor | 1 | 60 |
| Small Firm | 2 | 120 |
| Mid-sized Firm | 5 | 300 |
| Large Firm | 10 | 600 |
Important: These limits do not include statutory audits under Companies Act, GST, Co-operative Societies Act etc. Only 44AB assignments count.
**7️⃣ Taxpayer’s Perspective
- Clients must plan in advance to appoint tax auditors early.
- Large volume tax audit filers (like trade associations) should verify their auditor’s available capacity.
- Changing auditors closer to due dates could get difficult due to capped capacity.
**8️⃣ Recent and Related Developments
- CBDT Circular No. 6/2022: Clarified e-filing of Form 3CD.
- New e-verification guidelines: Enhanced scrutiny on mismatch of audited figures vs GSTR returns.
- ICAI has been progressively tightening audit guidelines to address concerns of dummy audits or paper audits.
- The new cap complements ICAI’s recent emphasis on audit documentation quality and Peer Review compliance.
**9️⃣ Recommendations for CAs
✅ Review client portfolio and rationalise assignments.
✅ Plan for mergers or genuine partnership expansions to build capacity.
✅ Strengthen audit documentation and compliance to avoid peer review non-compliances.
✅ Communicate proactively with recurring clients to manage expectations.
✅ Stay updated with ICAI announcements and disciplinary pronouncements.
**🔟 Way Forward
ICAI’s move signals a clear shift towards quality-centric auditing. With increased regulatory scrutiny and digital trails, superficial or bulk audits expose professionals to high risks — both legally and reputationally.
In the long run, this cap will reinforce the credibility of Indian Chartered Accountants, harmonise workloads, and align the profession with global ethical standards.
**📌 Key Takeaways
- ICAI will cap tax audits under Section 44AB to 60 per partner from FY 2026–27.
- Firms must plan capacity, partnerships, and client relationships accordingly.
- Non-compliance is a serious professional misconduct.
- Clients and businesses should engage auditors well before deadlines.
**✅ References
- ICAI Council Decision — 13 June 2024
- Income Tax Act, 1961 — Section 44AB
- ICAI Council Guidelines & Code of Ethics
Stox N Tax 
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