ICAI's 60 Tax-Audit Cap (from 1 April 2026) and the Tighter Form 3CD MSME Reporting

Updated 2026-08-02 · By KyaTax · 6 min read

Two audit-side developments matter for FY 2025-26 filings.

1. The 60 tax-audit cap (from 1 April 2026)

ICAI guidance retains a limit of 60 tax audits per member per financial year, applying in both individual and partnership capacities. Importantly, the cap cannot be distributed or shared across partners in a CA firm. Certain presumptive-scheme audits (44AD/44ADA/44AE) are excluded from the count.

2. Tighter MSME reporting in Form 3CD

Revised Clause 22 requires structured reporting of MSME payments — tying directly to Section 43B(h), which disallows a deduction for amounts owed to micro/small enterprises beyond the permitted payment window until actually paid. Auditors now expect businesses to continuously verify MSME status of suppliers and track payment timelines, not just at year-end.

For businesses, the message is practical: identify which suppliers are Udyam-registered micro/small enterprises and pay them within the statutory window, or the expense may be disallowed.

Important: This article is general information based on laws, notifications and public sources current as of August 2026. It is not legal, tax, accounting or professional advice or opinion, and must not be relied on for any decision. Tax and legal rules change frequently and their application depends on your specific facts. Please verify the latest position and connect with a KyaTax expert or your professional advisor before acting.

Rules change often and how they apply depends on your exact numbers and facts. Don't guess on the ICAI audit cap and Form 3CD MSME reporting — get a qualified professional to review your case.

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Frequently asked questions

Does the 60-audit cap affect me as a business?

Indirectly — plan your audit early, as your CA has a fixed annual limit. Book audit engagements in good time.

What does Clause 22 of Form 3CD now require?

Detailed reporting of MSME payment timelines linked to Section 43B(h). Your books must identify MSME suppliers and payment dates. A professional can help set this up.

How do I know if a supplier is a micro/small enterprise?

Check their Udyam registration. Keep a record; when in doubt, ask them to confirm in writing.