In a major relief for taxpayers in Karnataka and Rajasthan, the High Courts of both states have extended the deadline for filing Tax Audit Reports (TAR) under Section 44AB of the Income Tax Act, 1961. The new deadline is October 31, 2025, giving businesses and professionals an additional month to complete their audit compliance.

The order from the Karnataka High Court came after the Karnataka State Chartered Accountants Association (KSCAA) filed a petition seeking an extension. Similarly, the Rajasthan High Court in Jodhpur had earlier granted a one-month relief following a petition by the Tax Bar Association, Jodhpur.

Limited Relief: Orders Apply Only to Karnataka and Rajasthan

While these rulings bring relief to taxpayers in the two states, legal experts caution that the extension is not applicable pan-India. As of now, the Central Board of Direct Taxes (CBDT) has not issued any nationwide notification.

According to Himank Singhal, Founding Partner at SBHS Associates, “Since the orders were passed only by the High Courts of Karnataka and Rajasthan, the benefit is restricted to taxpayers in those states. A pan-India extension will only be possible if the CBDT issues an official notification. Alternatively, if the CBDT appeals in the Supreme Court, the situation could change.”

Why the Deadline Was Extended

Both High Courts noted that in past years, CBDT itself had provided extensions for filing deadlines to ease compliance pressure. Considering ongoing representations from tax professionals and associations, the courts decided to extend the deadline by one month, allowing additional time for filing the audit reports.

Who Needs to File a Tax Audit?

Under Section 44AB of the Income Tax Act, tax audit is mandatory for:

• Businesses with a turnover exceeding ₹1 crore in a financial year.

• Businesses with more than 95% of transactions conducted digitally, where the threshold rises to ₹10 crore.

• Professionals such as doctors, lawyers, architects, and chartered accountants earning more than ₹50 lakh annually.

• Taxpayers under presumptive taxation schemes (like Section 44ADA) if they declare profits below the prescribed limits.

A tax audit report verifies the accuracy of accounts and ensures compliance with tax laws. It must be filed by a chartered accountant on behalf of the taxpayer.

Penalties for Missing the Deadline

The original deadline for filing the Tax Audit Report was September 30, 2025. Failure to file on time can attract penalties. The law prescribes a penalty of 0.5% of turnover or ₹1.5 lakh, whichever is lower.

This makes it critical for businesses and professionals to meet the deadline, as non-compliance not only leads to monetary fines but could also increase the risk of scrutiny by the Income Tax Department.

What Taxpayers in Other States Should Know

For now, the extended deadline is applicable only in Karnataka and Rajasthan. Taxpayers in other states must continue to comply with the September 30 deadline, unless CBDT issues a central notification.

With multiple High Courts across the country currently hearing similar petitions, there is a possibility of broader relief. However, until any nationwide extension is officially announced, taxpayers outside these two states must prepare to file their reports before the end of September.

Key Takeaway

The High Court orders are a welcome move for tax professionals and businesses struggling with compliance timelines. However, unless CBDT steps in with a uniform extension across India, the relief remains limited to taxpayers in Karnataka and Rajasthan.

Businesses and professionals in other states are advised not to wait for a last-minute announcement and should file their Tax Audit Reports by September 30, 2025, to avoid penalties.