The Central Board of Direct Taxes (CBDT) has extended the deadline for filing tax audit reports (TARs) to October 31, 2025, from the original due date of September 30, 2025. This decision provides relief to taxpayers who were facing difficulties in meeting the initial deadline.

Reasons for the Extension

The CBDT's decision to extend the deadline came after considering representations from various professional associations. These associations cited several challenges, including:

• Disruptions due to natural calamities: Floods and other natural disasters in certain regions of the country have disrupted normal business operations and made it difficult for taxpayers and audit professionals to complete audits on time.
• Technical issues and late release of forms: Delays in the release of some ITR forms and technical glitches on the income tax e-filing portal have also contributed to the difficulties faced by taxpayers.
• Reduced time frame: The ICAI noted that the shifting of the tax filing deadline from July 31 to September 15 put pressure on professionals to complete audit work within a shorter period.

Applicability of the Extension

The extension applies to assessees who are required to get their accounts audited under clause (a) of Explanation 2 to sub-section (1) of section 139 of the Income-tax Act, 1961 for the financial year 2024-25.

Implications of the Extension

The extension of the tax audit deadline is expected to provide significant relief to taxpayers and tax professionals. It will give them more time to complete the audit process and file their reports accurately. The CBDT has acknowledged the practical challenges faced by practitioners and aims to ease compliance stress by granting this extension.

Judicial Support for Extension

Prior to the CBDT's announcement, several High Courts in India had also taken cognizance of the difficulties faced by taxpayers due to natural calamities and technical glitches. The Rajasthan High Court and the Karnataka High Court had already extended the due date for filing Tax Audit Reports to October 31, 2025.

ICAI's Role

The Institute of Chartered Accountants of India (ICAI) has been actively involved in representing the concerns of taxpayers and tax professionals to the CBDT. The ICAI had requested an extension of the deadline, citing the complexities and challenges faced in meeting the original requirements. The ICAI's Direct Tax Committee (DTC) had also submitted a representation to the CBDT, highlighting issues in filing ITR forms 5, 6, and 7, along with the troubles faced while filing tax-audit reports.

Smooth Functioning of the E-Filing Portal

The CBDT has clarified that the Income Tax e-filing portal is functioning smoothly. As of September 24, over 4.02 lakh Tax Audit Reports had been uploaded, and more than 7.57 crore income tax returns had been filed. Despite the portal's stability, the Board recognized the practical challenges on the ground that made it difficult for some practitioners to meet the original deadline.

Penalties for Non-Compliance

It's important to note that failing to file the Tax Audit Report by the extended deadline of October 31, 2025, can attract penalties. As per Section 44AB of the Income Tax Act, 1961, the penalty can be 0.5% of turnover or Rs 1.5 lakh, whichever is lower.