Tax Audit Form 3-CD amended: Know key changes introduced in Tax Audit Report
There are lot many changes which has been done in the tax audit report which is required to be filed by the auditor in Form No. 3CB. The changes includes modification of the existing clauses, removal of unwanted requirements and addition of the few more clauses in view of the changing laws. More particularly, Government focus on compliance with the MSME Act is visible as clause 22 related to MSME has been revised. Now, any outstanding payments to micro and small enterprises beyond the prescribed period must be disclosed.
In my view, after the new Income Tax Bill -2025 find the light of the day, entire Income Tax Rules as well as all the Forms therein will be revised. It is learnt that the process is also undertaken by the Officials for this. There are the likelihood that the seller / service provider who are MSME may be required to report the name of the buyer who has not made the payment to them as per MSME Act. The sellers details vis a vis buyers tax audit report who then be reconciled to arrive at the disallowance of the amount under section 43B(h) in the hands of the buyer. This is also considered as a step towards ensuring pre-filled income tax returns forms for all the taxpayers.
The way the tax landscape is evolving may be very terrifying the non compliant taxpayers. This
As of now, let us have a look at the Key Changes Introduced in Form 3CD Effective from 1st April 2025 as under:
1. Omission of Certain Deductions under Clause 19.
References to Sections 32AC, 32AD, 35AC, and 35CCB have been removed. These sections previously allowed for certain investment-linked deductions, which are now omitted due to legislative changes.
2. Insertion of Section 44BBC in Clause (12) of Form No. 3CD
This amendment introduces a new reporting requirement under Section 44BBC. It mandates auditors to report the presumptive taxation details for specific professionals notified under this section.
3. Modification of Clause (21)
This clause now includes a requirement to report expenses incurred for settling legal proceedings related to contraventions notified by the Central Government. Any expenditure of this nature must be disclosed, increasing transparency in tax audits.
4. Replacement of Clause (22)
This clause has been revised to include the following details:
– Interest inadmissible under Section 23 of the MSMED Act, 2006 – Any interest paid to micro or small enterprises for delayed payments, which is disallowed as an expense, must now be reported.
– Amounts due to Micro or Small Enterprises under Section 15 of the MSMED Act
– Any outstanding payments to micro and small enterprises beyond the prescribed period must be disclosed. This change enhances reporting related to delayed payments under the MSMED Act.
5. Changes in Clause (26):
Modifications have been made to the language and references related to tax allowances, ensuring better clarity and compliance with updated provisions.
6. Omission of Clauses (28) and (29):
These clauses, which previously required reporting on certain specific tax benefits, have been removed to align with recent tax law amendments as it is no more relevant.
7. Changes in Clause (31)
Introduction of new reporting codes for various types of financial transactions under section 269SS, 269ST & 269T including the following:
– Cash payments or receipts
– Non-account payee cheques
– Journal entries and other modes of payment
Auditors are now required to specify the nature of each loan or deposit transaction. This aims to strengthen reporting on cash and non-cash transactions, reducing the scope for non-compliance.
For reporting of section 269SS and 269T, specific drop down menu provided to report certain modes. It includes Transfer of asset/ liability, Conversion of assets/ liabilities, Journal entries etc.
8. Insertion of New Clause (36B) – Buyback of Shares
A new clause has been introduced to capture detailed information on share buybacks. Companies must report all buyback transactions, ensuring proper disclosure of corporate actions that may have tax implications.
These changes are aimed at increasing transparency and ensuring better compliance. Taxpayers & professionals must align their reporting processes accordingly!
