Tax Audit Report is a document prepared by a Chartered Accountant.
It is prepared after examining thoroughly the financial records of a taxpayer’s business to ensure compliance with the Income tax Act of India.
The report is mandatory and must be submitted if the businesses and professionals turnover exceeds a specified threshold.
The report contains various clauses where the auditor verifies and certifies details like income, compliance with TDS provisions, deductions, loans or exemptions claimed by the taxpayer and compliance with tax laws.
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Recent Updates
Clause 8a: Whether the assessee has opted for special taxation regimes of low tax rates without certain exemptions and deductions
| Before | After |
| Pre-amended Clause 8a requires the tax auditor to state “Whether the assessee has opted for taxation under section 115BA/115BAA/115BAB/115BAC/115BAD”. | The Finance Act 2023 introduced an alternative tax scheme for manufacturing co-operative societies under Section 115BAE. Clause 8a adds to include 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”. |
Clause 12: Reporting whether the P&L account includes profits & gains assessable on a presumptive basis
| Before | After |
| Clause 12 of Form 3CD requires the tax auditor 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, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB, Chapter XII-G, First Schedule or any other relevant section)”. | Amended Clause 12 requires the tax auditor 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)”. |
Clause 18: Reporting on admissible amount of depreciation under Section 32
| Before | After |
| The pre-amended sub-clause (ca) of Clause 18 requires reporting the following: “Adjustment made to the written down value under Section 115BAC/115BAD (for the assessment year 2021-22 only).” | The substituted Clause 18(ca) requires the tax auditor to report as follows: “(ca) Adjustment made to the written down value–– (i) under the proviso to sub-section (3) of Section 115BAA (for assessment year 2020-21 only); (ii) under the first proviso to sub-section (3) of section 115BAC or the proviso to sub-section (3) of 115BAD (for assessment year 2021-22 only); (iii) under the second proviso to sub-section (3) of section 115BAC (for assessment year 2024-25 only).”; This amendment is consequential to amendment of Section 115BAC by the Finance Act 2023, with effect from the assessment year 2024-25. |
Clause 19: Amounts admissible under Sections 32AC, 32AD, etc
| Before | After |
| The pre-amended Clause 19 requires tax auditor to report amounts admissible under Sections 32AC, 32AD, 33AB, 33ABA, 35(1)(i), 35(1)(ii), 35(1)(iia), 35(1)(iii), 35(1)(iv), 35(2AA), 35(2AB), 35ABB, 35AC, 35AD, 35CCA, 35CCB, 35CCC, 35CCD, 35D, 35DD, 35DDA and 35E. The amount admissible has to be reported section-wise in Tabular form. The pre-amended Clause 19 in Notified Form 3CD contains no reference to Section 35ABA, while the e-filing utility contains a reference to Section 35ABA. | 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”. |
Clause 21(a): Items of expenditure debited to P&L account of the nature covered by 6th ,7th and 8th items in the Tabular format
Before
Items 6, 7 and 8 of Tabular format in Pre-amended Clause 21(a) require the tax auditor to report amounts debited to the P&L account in respect of:
- Expenditure by way of penalty or fine for violation of any law for the time being force (6th item)
- Expenditure by way of any other penalty or fine not covered above(7th item)
- Expenditure incurred for any purpose which is an offence or which is prohibited by law (8th item)
After
The amended Clause 21(a) increases the number of items from 8 to 9 as follows:
- Entry 6, “Expenditure by way of penalty or fine for violation of any law for the time being force”, 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)”;
- 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;
- Entry 9, “Expenditure incurred for any purpose which is an offence or which is prohibited by law”, 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”.
Correction of clerical error in Clause 21(b)((ii)(b)(IV)
Pre-amended Clause 21(b)(ii)(b)(IV) of Form 3CD required reporting of amounts inadmissible under section 40(a):
(ii) as payment referred to in sub-clause (ia)
(A) **********
(B) Details of payment on which tax has been deducted but has not been paid on or before the due date specified in sub-section (1) of section 139.
- date of payment
- amount of payment
- nature of payment
- name and address of the payer
- amount of tax deducted
- amount out of (V) deposited, if any
To correct the clerical error in (IV) above, for the word “payer”, the word “payee” shall be substituted. Practically, this will have no impact on the reporting obligations of the tax auditor.
Clause 26: Reference of clause (h) in Section 43B dealing with delayed payments to MSEs
In Clause 26, for the brackets, letters and word “(f) or (g)”, the brackets, letters and word “(f), (g) or (h)” have been substituted. The amended Clause 26 now reads as follows:
In respect of any sum referred to in clause (a), (b), (c), (d), (e), (f), (g) or (h) of section 43B, the liability for which:
(A) pre-existed on the first day of the previous year but was not allowed in the assessment of any preceding previous year and was
- paid during the previous year;
- not paid during the previous year;
(B) was incurred in the previous year and was
- paid on or before the due date for furnishing the return of income of the previous year under section 139(1);
- not paid on or before the aforesaid date.
Clause 32: Reference to Section 115BAE
In clause 32, in sub-clause (a), –
- in the table, in column (5), for figure and letters “115BAD”, the figures and letters “115BAD/115BAE” shall be substituted;
- in the table, in column (6), for figure and letters “115BAD”, the figures and letters “115BAD/115BAE” shall be substituted;
- below the table, for the words and figures “To be filled in for assessment year 2021-22 only”,the words and figures “To be filled in only for assessment year 2021-22 and 2024-25, as applicable”, shall be substituted.