CBDT Amends Form 3CD again: Changes in Reporting Requirements for MSME Section 43B(h)

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The Central Board of Direct Taxes (CBDT) has introduced significant amendments to Form 3CD through two notifications dated 05-03-2024 and 19-03-2024

1. First Change: Notification No. 27/2024

The initial amendment notified under Notification No. 27/2024/F. No. 370142/3/2024-TPL, dated 05-03-2024, focuses on the disclosure of section 43B(h) disallowance under clause 26 of Form 3CD. However, Clause 22, which pertains to interest restrictions under the Micro, Small, and Medium Enterprises Development Act, 2006 (MSMED Act), remained unamended.

Under this change, Clause 22 has been amended to include the disclosure of the amount disallowed under section 43B(h), along with the amount of interest inadmissible under section 23 of the MSMED Act, 2006. This modification aims to provide a comprehensive overview of disallowed expenses and interest restrictions for taxpayers.

2. Second Change: Notification No. 34/2024

Subsequently, the CBDT issued another Notification, No. 34/2024 F. No. 370142/3/2024-TPL, Dated 19th March 2024 introducing further revisions to Form 3CD. This amendment specifically addresses the reporting of section 43B(h) disallowance.

The key change introduced through this notification is the relocation of the reporting requirement from Clause 26 to Clause 22 of Form 3CD. Instead of reporting alongside other Section 43B matters, the disallowance under section 43B(h) is now to be reported under Clause 22, which relates to MSMED interest disallowance. Clause 22 will now encompass both principal disallowance under Section 43B(h) and interest disallowance under the MSMED Act.

Implications for Taxpayers

These amendments have significant implications for taxpayers subject to tax audit under the Income Tax Act, 1961. It is imperative for taxpayers to ensure compliance with the revised reporting requirements outlined in Form 3CD. Failure to accurately disclose disallowed expenses and interest restrictions may result in penalties or adverse consequences during tax assessments.

The revisions to Form 3CD represent a proactive effort by the CBDT to enhance clarity and transparency in tax reporting. By incorporating additional disclosures and relocating reporting requirements, the CBDT aims to simplify compliance processes for taxpayers and facilitate smoother tax audits.

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Pooja Gupta

CA Pooja Gupta (CA, ISA, M.com) having 15 years of experience. Educator and Digital Creator

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CA Pooja Gupta (CA, ISA, M.com) having 15 years of experience. Educator and Digital Creator

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