Tax Audit for Assesment Year 2024-25

Overview of Clauses for Form 3CD

The Guidance Note (GN) on Tax Audit under Section 44AB of the Income-tax Act, 1961 prov
reporting the various clauses in Form 3CD, used for tax audits. Below is an overview of the
the auditor's responsibilities, as described in the GN:

1. Clause 1 to 3: Basic Information

-Clause 1: The name of the assessee.
- Clause 2: Address.
- Clause 3: Permanent Account Number (PAN) or Aadhaar number.
- Objective: To establish the identity of the assessee.

2. Clause 4: Liability to Indirect Taxes

- Objective: If the assessee is liable to pay indirect taxes such as GST, customs duty, etc., the registr

3. Clause 8: Applicability of Section 44AB

- This clause mentions under which provision of Section 44AB the audit is being conducted, such as:
- 44AB(a): Business turnover exceeding ₹1 crore.
- 44AB(b): Professional receipts exceeding ₹50 lakh.
- 44AB(c): Presumptive taxation lower than required under Section 44AD/44ADA.

4. Clause 12: Method of Accounting

-Objective: report whether the assessee follows cash or mercantile accounting. Changes in the meth

5. Clause 21: Deductions Under Sections 40, 40A, and 43B

-Clause 21(b): Disallowance for non-compliance with TDS provisions.
- The auditor should ensure that amounts that were not deducted or deposited with the government a
- Clause 21(e): Reporting of expenses disallowed under Section 43B, such as unpaid taxes, contrib

6. Clause 31: Loans or Deposits

- Requires the auditor to confirm whether any loans or deposits accepted or repaid exceed ₹20,000 in

7. Clause 34: Tax Deducted at Source (TDS)

-The auditor must report whether the assessee was required to file TDS returns and whether the filing

8. Clause 42: Deemed Profit Under Sections 33AB/33ABA

If the assessee has claimed certain reserves, such as tea, coffee, or rubber development accoun

9. Clause 44: Break-up of Total Expenditure

This clause asks for the break-up of total expenditure into payments made to related parties, register
ome-tax Act, 1961 provides a detailed explanation for
w is an overview of the key clauses in Form No. 3CD and

oms duty, etc., the registration details are required.

ng conducted, such as:

ing. Changes in the method of accounting should also be reported.

ed with the government are reported.

h as unpaid taxes, contributions to provident fund, etc.

epaid exceed ₹20,000 in cash. This is essential for compliance under **Section 269SS/269T**.

ns and whether the filings were done on time. If TDS is deducted but not deposited, this also needs to be disclo

r development accounts, the auditor needs to verify the compliance with the specified conditions under thes

o related parties, registered/unregistered entities under GST, etc., to ensure proper compliance with GST laws a
is also needs to be disclosed.

ed conditions under these sections.

mpliance with GST laws and identify any improper payments.

Tax Audit for Assesment Year 2024-25
Applicability of Clauses- 3CD

Form 3CD is used to report the details of a tax audit conducted under Section 44AB of the
of the various clauses in Form 3CD depends on the nature of the business, the accounting
matters. Here is an overview of the applicability of some important clauses in Form 3CD:

1. Clause 8: Applicability of Section 44AB

Applicable to : All taxpayers subject to tax audit.
Purpose : It specifies under which provision of Section 44AB the audit is conducted (e.g., for b

2. Clause 12: Method of Accounting

Applicable to : All taxpayers.
Purpose : To report whether the taxpayer uses the mercantile or cash basis of accounting. An

3. Clause 13: Method of Valuation of Closing Stock

Applicable to : Taxpayers who maintain stock-in-trade.
Purpose : Requires reporting the method used to value closing stock and whether there has b

4. Clause 16: Amounts Not Credited to Profit and Loss Account

Applicable to : Taxpayers who have income that is not credited to the profit and loss account.
Purpose : To disclose any income that is not reflected in the profit and loss account, such as

5. Clause 17: Transfer of Land/Building

Applicable to : Taxpayers who have transferred any land or building during the financial year.
Purpose : To report any transactions involving the transfer of immovable property, which ma

6. Clause 18: Depreciation

Applicable to : All taxpayers who claim depreciation on assets.
Purpose : To disclose the method of depreciation, the rate, and any changes from the previo

7. Clause 21: Deductions Under Sections 40, 40A, and 43B

Applicable to : Taxpayers claiming certain deductions.
Purpose : To report amounts disallowed under these sections, such as:
Section 40 : Disallowances for non-compliance with TDS.
Section 40A(3) : Cash payments exceeding ₹10,000.
Section 43B : Deductions allowed only on actual payment (e.g., taxes, contributions to PF).

8. Clause 23: Payments to Related Parties

Applicable to : Taxpayers making payments to related parties.
Purpose : To disclose payments made to related parties as defined under Section 40A(2)(b).

9. Clause 31: Compliance with Section 269SS and 269T

Applicable to : Taxpayers who accept or repay loans or deposits.
Purpose : To report whether the taxpayer has complied with the provisions restricting cash tr
10. Clause 34: TDS Compliance
Applicable to : Taxpayers required to deduct tax at source (TDS).
Purpose : To disclose the status of TDS deductions, deposits, and filing of TDS returns, along

11. Clause 36: Dividend Distribution Tax (DDT)

Applicable to : Domestic companies distributing dividends (applicable until DDT was abolished in
Purpose : To report details of DDT payable and compliance with the provisions.

12. Clause 42: Deemed Profits Under Sections 33AB/33ABA

Applicable to : Taxpayers claiming certain reserves for tea, coffee, rubber development, etc.
Purpose : To report compliance with the provisions relating to these reserves.

13. Clause 44: Break-up of Total Expenditure

Applicable to : All taxpayers, especially those registered under GST.
Purpose : To provide a break-up of total expenditures, categorized by payments made to ent
under Section 44AB of the Income-tax Act, 1961. The applicability
business, the accounting methods used, and specific tax-related
ant clauses in Form 3CD:

audit is conducted (e.g., for businesses exceeding turnover limits, professionals exceeding gross receipts limits

r cash basis of accounting. Any changes in accounting methods during the financial year must also be disclosed

tock and whether there has been any change in the method of valuation.

e profit and loss account.

fit and loss account, such as capital gains or exempt income.

during the financial year.

movable property, which may have tax implications under capital gains.

any changes from the previous method.

es, contributions to PF).

ed under Section 40A(2)(b).

provisions restricting cash transactions (e.g., accepting or repaying loans or deposits above ₹20,000 in cash).
d filing of TDS returns, along with any late deposits or short deductions.

e until DDT was abolished in FY 2020-21).

the provisions.

bber development, etc.

hese reserves.

ed by payments made to entities registered and not registered under GST, and payments where no GST input t
ding gross receipts limits, or taxpayers under presumptive schemes).

ar must also be disclosed.

above ₹20,000 in cash).

nts where no GST input tax credit is available.
Tax Audit for Assesment Year 2024-25
Information to be filled in Form 3CD

A Part A: General Information

1 Clause 1 : Name of the assessee.
- Full name of the assessee (individual/company/firm).

2 Clause 2 : Address of the assessee.

- Complete address, including postal code.

3 Clause 3 : PAN/Aadhaar number.

- PAN or Aadhaar card number (if applicable).

4 Clause 4 : Registration numbers under indirect tax laws.

- GSTIN or any other registration number under indirect tax laws like GST, Customs.

5 Clause 5 : Status of the assessee.

- Status (individual, HUF, company, firm, AOP, BOI, etc.).

6 Clause 6 : Assessment year.

- The relevant assessment year for which the audit is being conducted.

7 Clause 7 : Previous year.

- Financial year to which the audit report pertains.

8 Clause 8 : Applicability of Section 44AB.

- The clause under Section 44AB applicable to the assessee, such as 44AB(a) (business turnov

B Part B: Financial Information

9 Clause 9 : Date of commencement of business.
- Date on which the business or profession started.

10 Clause 10 : Nature of business or profession.

- A brief description of the business or profession.

11 Clause 11 : Books of account maintained and location.

- List of books of account (e.g., ledger, journal, cash book) and their locations.

12 Clause 12 : Method of accounting.

- Whether the accounting method is cash or mercantile (accrual) basis.

13 Clause 13 : Method of stock valuation.

- Method used for valuation of stock (FIFO, weighted average, etc.) and changes, if any.
C Income, Deductions, and Expenses
14 Clause 14 : Discrepancies in stock.
- Any discrepancies found during tax authority surveys or inquiries related to stock.

15 Clause 15 : Capital assets converted into stock-in-trade.

- Date and value of the capital assets when converted to stock-in-trade.

16 Clause 16 : Amounts not credited to profit and loss account.

- Any income, such as capital gains or exempt income, not credited to the profit and loss acco

17 Clause 17 : Transfer of land or building.

- Details of transactions involving land or building and capital gains treatment under Section

18 Clause 18 : Depreciation details.

- Method of depreciation (SLM/WDV), rates used, and changes, if any.

19 Clause 19 : Amounts disallowed under Section 37.

- Details of expenses that are not fully allowable, such as personal expenses or fines.

20 Clause 20 : Details of capital or personal expenses.

- Information on expenses debited to the profit and loss account that are of a personal or cap

21 Clause 21 : Disallowance under Sections 40, 40A, and 43B.

- Section 40: Expenses disallowed due to non-compliance with TDS.
- Section 40A(3): Cash payments exceeding ₹10,000.
- Section 43B: Expenses allowed only on actual payment (e.g., taxes, employee benefits).

D Loans, Deposits, and Cash Transactions

22 Clause 22 : Payments to related parties.
- Payments made to persons or entities specified under Section 40A(2)(b) (related parties).

23 Clause 23 : Details of loans and deposits.

- Information on loans or deposits repaid or accepted in violation of Section 269SS/269T (₹20

E Additional Income and Transaction Data

24 Clause 24 : Details of cash transactions.
- Cash receipts exceeding ₹2 lakh in a single transaction under Section 269ST.

25 Clause 26 : Compliance with TDS provisions.

- TDS deducted, deposited, and returns filed; late payments or short deductions.

26 Clause 28 : Payments to non-residents.

- Payments made to non-residents, including withholding taxes and compliance with Section
27 Clause 29 : Income deemed as profits.
- Income deemed as profits under Section 32AC, 33AB, 33ABA, 35ABB, etc.

F GST and Expenditure Data

28 Clause 33 : Indirect tax liability.
- Liabilities and payments under GST, excise, customs, etc.

29 Clause 34 : TDS compliance for GST.

- Compliance with TDS under GST, if applicable.

30 Clause 36 : Dividend Distribution Tax (DDT).

- Details of DDT payable and paid.

G Miscellaneous Data
31 Clause 37- : Cost audit and Excise audit.
- Details of any cost or excise audits conducted and findings.

32 Clause 42 : Income from tea, coffee, or rubber plantations.

- Reporting of income under Sections 33AB/33ABA

33 Clause 44 : Break-up of total expenditure under GST.

- Details of total expenditure, categorized by payments made to GST-registered and non-regi
like GST, Customs.

h as 44AB(a) (business turnover), 44AB(b) (profession), 44AB(c), 44AB(d), etc.

heir locations.

c.) and changes, if any.

es related to stock.

ted to the profit and loss account.

ins treatment under Section 50C.

al expenses or fines.

that are of a personal or capital nature.

es, employee benefits).

40A(2)(b) (related parties).

of Section 269SS/269T (₹20,000 or more in cash).

Section 269ST.

hort deductions.

and compliance with Section 195

5ABB, etc.

GST-registered and non-registered entities, as well as expenses where no GST input tax credit was availed.
ax credit was availed.