Background:
The CBDT has notified changes to the Form 3CD vide Notification No. 27/2024 /F. No. 370142/3/2024-TPL, dated 05-03-2024. These changes shall apply to all tax audit reports signed on or after 05-03-2024, irrespective of the assessment year to which the tax audit report relates.
Changes has been made in the following Clauses of Form 3CD:
| Clause | Changes | Impact |
| 8a. | Clause 8a adds the reference to Section 115BAE and requires the tax auditor to report “Whether the assessee has opted for taxation under section 115BA/ 115BAA / 115BAB / 115BAC /115BAD/115BAE“. | The aforementioned changes are a result of the Finance Act, 2023, which introduced Section 115BAE in the Income-Tax Act, 1961, dealing with the taxation of certain new manufacturing co-operative societies. |
| 12. | Clause 12 adds the reference to Section 44ADA andrequires to report”Whether the profit and loss account includes any profits and gains assessable on a presumptive basis, if yes, indicate the amount and the relevant sections (44AD, 44ADA, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB, Chapter XII-G, First Schedule or any other relevant section)”. | Earlier, disclosure of Section 44ADA was provided under any other relevant section of the Clause 12. Section 44ADA provides a simple method of taxation for small professionals. Therefore, in practical terms, the amendment to Clause 12 does not alter the auditor’s reporting obligation under Clause 12. |
| 18(ca). | Clause 18(ca) adds the reference to Section 115BAC as follows: “(ca) Adjustment made to the written down value–– (iii)under the second proviso to section 115BAC (3) (for AY 2024-25 only).”; | The Finance Act, 2020 added new sections 115BAC to Income Tax Act, in which an individuals gets the choice to select between the actual income tax rates and the new concessional tax rates without considering prescribed deductions and exemptions. The changes are consequential to the insertion of second proviso to section 115BAC(3) by the Finance Act, 2023. |
| 19. | Clause 19 has been amended to include a reference to the following two entries: Adding a row with the entry “35ABA”Adding a row of “any other relevant section”. | Section 35ABA is for deductions under Expenditure towards right to use spectrum for telecommunication services. |
| 21(a). | Clause 21(a) have been amended to include / modify following items: (a)Entry 6 has been substituted with “Expenditure for any purpose which is an offence or is prohibited by law or expenditure by way of penalty or fine for violation of any law (enacted in India or outside India)“; (b) A new entry 8, “Expenditure incurred to compound an offence under any law for the time being in force, in India or outside India”, has been inserted; (c)Entry 9 has been substituted with “Expenditure incurred to provide any benefit or perquisite, in whatever form, to a person, whether or not carrying on a business or exercising a profession, and acceptance of such benefit or perquisite by such person is in violation of any law or rule or regulation or guideline, as the case may be, for the time being in force, governing the conduct of such person”. | The impact of substitutions as above are as follows: •Under entry 6, such expenditure debited to P&L requires reporting irrespective of whether it is for violation of Indian law or foreign law. Item 6 & 8 of pre amendment has been merged as new item 6. •New entry 8 requires reporting of expenditure incurred to compound an offence under any law for the time being in force, in India or outside India. • Entry 9 necessitates the reporting of expenditures incurred to provide any benefit or perquisite to an individual, regardless of whether they are engaged in a business or profession. Unlike the 6th and 8th entries, Entry 9 does not make any reference to laws, rules, regulations, or guidelines outside India. |
| 21(b) (ii)(B) (IV). | Amended Clause 21(b)(ii)(B)(IV) required reporting of amounts inadmissible under section 40(a): (B) Details of payment on which tax has been deducted but has not been paid on or before the due date. (IV)name and address of the payee. | To rectify the clerical error in (IV) above, the word “payer” shall be substituted with “payee”. However, practically, this correction will not affect the reporting obligations of the tax auditor. |
| 26. | Clause 26 adds the reference to Clause (h) of Section 43B. | This amendment is consequential to the insertion of new clause (h) by the Finance Act, 2023, in Section 43B of the Income Tax Act, with effect from the AY 2024-25. It aims to disallow, on an accrual basis, sums payable to micro or small enterprises if they are not paid within the time allowed under Section 15 of the MSMED Act, 2006. For further details, please refer to the SW Insights dated 13.02.2024. |
| 32(a). | Clause 32(a) adds the reference as follows: Amount as adjusted by withdrawal of additional depreciation on account of opting for taxation under section 115BAC / 115BAD / 115BAE for AY 2021-22 and 2024-25, as applicable. | The above changes are consequential to insertion by the Finance Act,2023, of Section 115BAE dealing with Tax on certain new manufacturing co-operative societies) of the Income-Tax Act,1961 (“the Act”). |
| SW Point of View: The amendments highlight the significance of being informed about regulatory changes to ensure accurate reporting and compliance. It emphasizes the need for adaptability in navigating evolving regulations, ensuring compliances. |
Udit Maheshwari, Audit Associate, SW
