The Central Board of Direct Taxes (CBDT), via Notification No. 23/2025 dated March 28, 2025, introduced several updates to Form 3CD under the Income-tax (Eighth Amendment) Rules, 2025. These revisions aim to improve tax audit reporting and enhance compliance standards for businesses.
What is Form 3CD?
Form 3CD is a detailed audit report required under Section 44AB of the Income-tax Act, 1961. It includes:
- Part A: General information such as PAN, assessment year, and nature of business.
- Part B: Compliance-related disclosures including deductions, TDS/TCS, loans, and other financial transactions.
It is mandatory for:
- Businesses with turnover > ₹1 crore (₹10 crore if digital transactions ≥ 95%)
- Professionals with gross receipts > ₹50 lakh
Key Changes with Clause References
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- New Clause 44BBC
- Purpose: Disclosure of income under Section 44BBC relating to broadcasting/telecasting/sports rights.
- Clause affected: Added under Clause (12).
- Ensures full reporting of such specialized income to reduce tax evasion.
- Omission of Outdated Deductions – Clause 19
Removed deduction-specific disclosures for the following:- Section 32AC – Investment in new plant and machinery
- Section 32AD – Investments in notified backward areas
- Section 35AC – Donations to approved welfare projects
- Section 35CCB – Conservation of natural resources These deductions are no longer applicable and have been removed to simplify audit filings.
- Removal of Clauses (28) and (29): These clauses, which required disclosures on TDS non-compliance (Clause 28) and disallowed payments to partners under Sections 40(b) and 40(ba) (Clause 29), have been omitted.
- Enhanced MSME Reporting – Clause 22
Businesses must now report:- Payments outstanding to MSMEs
- Delayed payments beyond prescribed timelines under the MSMED Act
This change promotes prompt payment practices and safeguards MSME interests.
- Buyback of Shares – Clause 23
Introduced reporting for:- Buyback transactions by companies under Section 115QA
- Ensures disclosure of tax liabilities related to buyback
- Updated Reporting of Loans/Deposits – Clauses 24 & 31
- Improved coding and clarity in reporting loans, deposits, and repayments
- Strengthens scrutiny of cash-based transactions and related-party dealings
- Clarification in Clause 34 – TDS/TCS Compliance
- Mandates detailed reporting on sections where no tax was deducted due to certificates or exemptions
- Aims to curb misuse of nil or lower deduction certificates
Impact on Taxpayers and Auditors
These changes demand more granular and timely disclosures, especially concerning MSMEs and specialized income. Tax professionals should upgrade their audit procedures accordingly to avoid penalties under Section 271B for non-compliance.
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