The Draft Income-tax Rules, 2026 continue their push towards standardisation and transparency with the introduction of Rule 172, which lays down uniform guidelines for determining expenses related to special audit and inventory valuation ordered by the tax authorities.
This rule is particularly relevant for Assessing Officers, Chartered Accountants, Cost Accountants and taxpayers involved in proceedings under section 268 of the Act.
Panel of Accountants and Cost Accountants to Be Maintained
Under Rule 172, every Chief Commissioner of Income-tax (CCIT) is required to maintain a formal panel comprising:
- Accountants, selected from professionals referred to in Section 515(3)(b) of the Act, and
- Cost Accountants, selected from persons referred to in Section 268(13) of the Act.
This ensures that audits and inventory valuations are conducted only by qualified and empanelled professionals, enhancing credibility and procedural fairness.
When Do These Guidelines Apply?
The provisions of Rule 172 come into play when the Assessing Officer (AO) directs:
- A special audit under section 268(5)(i), or
- An inventory valuation under section 268(5)(ii) of the Act.
Once such a direction is issued, the remuneration and related expenses must strictly follow the limits prescribed under this rule.
Prescribed Hourly Fee Structure: Minimum and Maximum Rates
Rule 172 introduces a clear hourly billing framework, bringing certainty to professional fees:
- Minimum rate: Rs 3,750 per hour
- Maximum rate: Rs 7,500 per hour
These rates are inclusive of all expenses, covering:
- Remuneration of the Accountant or Cost Accountant
- Fees of qualified, semi-qualified and other assistants
- Incidental costs connected with audit or inventory valuation
The applicable hours are those specified by the Assessing Officer under sections 268(8), 268(9) or 268(10), as the case may be.
Time Period to Be Defined in Hours
The rule mandates that the period for completion of the report must be specified in terms of the number of hours, rather than vague timelines. This shift to an hourly framework improves transparency and prevents arbitrary fee claims.
Mandatory Maintenance of Time-Sheets
To ensure accountability, Rule 172 requires that:
- The appointed Accountant or Cost Accountant maintain a detailed time-sheet, and
- Submit the time sheet along with the bill to the CCIT or the Commissioner of Income Tax.
This aligns professional billing with actual work performed.
Oversight by Tax Authorities
The Chief Commissioner or Commissioner of Income-tax is entrusted with a supervisory role and must ensure that:
- The number of hours billed is reasonable, and
- The billing is commensurate with the size, complexity and quality of the report submitted.
This provision acts as a safeguard against inflated claims and ensures value for public expenditure.
Why Rule 172 Is Significant
Rule 172 marks a decisive step towards:
- Standardising professional fees in tax-mandated audits
- Reducing disputes over remuneration
- Enhancing transparency and administrative discipline
- Protecting both professionals and taxpayers from arbitrary assessments
By clearly defining fee ranges, billing methodology, and oversight mechanisms, the rule balances fair compensation with regulatory control.
Key Takeaway
With the introduction of Rule 172, the Draft Income-tax Rules, 2026 provide much-needed clarity on how audit and inventory valuation expenses are to be computed, billed, and reviewed. Tax professionals and authorities alike must familiarise themselves with these provisions as they will directly impact compliance and procedural integrity going forward.
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