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This last fortnight of September is going to prove to be very busy and important for businessmen, professionals and Chartered Accountants (CAs) across the country. Last date for filing tax audit report (Form 3CD along with Form 10B/3CA/3CB) under section 44AB of the Income Tax Act for the financial year 2025-26 (Assessment Year 2026-27) 30 September 2026 It is fixed.
This time the tax audit process is not going to be the usual ‘roll-forward’ or copy-paste based like in previous years. 8 major and stringent changes have been implemented in the details of Form 3CD under the amendments notified by the Central Board of Direct Taxes (CBDT). If the taxpayer or tax auditor uploads the audit report based on the old format, an error (defective return) may occur on the portal or a heavy penalty may be imposed by the Income Tax Department.
Clause 12 of Form 3CD deals with reporting of profits included in the Profit and Loss Account (P&L) which are taxable on the basis of presumptive taxation.
Under this amendment clause 12 now Section 44BBC has been added as mandatory. This section specifically deals with special taxation of profits arising from the operation of certain specified cruise ships. If this category of income is included in the accounts of an assessee, it will now have to be shown separately along with the old sections (44AD, 44ADA, 44AE).
In order to simplify the income tax laws and remove provisions that have become irrelevant, four old deduction lines from Clause 19 have been completely abolished:
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Section 32AC (Deduction on investment in new plant and machinery in manufacturing)
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Section 32AD (Deduction on investment in notified backward areas)
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Section 35AC (expenditure on social and economic welfare projects)
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Section 35CCB (Expenditure on environment protection programmes)
Tax advisors must ensure that they remove these repealed sections columns in the audit working papers so that XML/JSON errors do not occur in the e-filing utility.
The scope of Clause 21(a) has been made extremely strict. Earlier, only penalties or fines imposed for violation of any law were shown in the Disallow category.
It has now been made mandatory to report separately the expenses incurred for settlement of punitive or regulatory proceedings initiated under any law notified by the Central Government. That is, if a company has paid any settlement fee or compounding charge to avoid SEBI, FEMA or other regulatory scrutiny, then it can no longer be claimed as a business expense and the auditor will have to give clear information about it.
This change is the most sensitive for the entire business world. The amended Clause 22 now calls for three-tier reporting of transactions under Sections 15 and 23 of the MSME (Micro and Small Enterprises) Act:
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Amount of interest declared invalid under Section 23 of MSMED Act.
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The total amount payable under section 15 to micro or small enterprises during the financial year.
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Total amount repaid within the stipulated time limit (15 or maximum 45 days).
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Outstanding amount not repaid within stipulated time and not included in taxable income (Inadmissible).
By updating clause 26 under section 43B, the word ‘Allowed’ has been replaced by ‘Allowable’ and in this Section 43B(h) are clearly separated.
Ordinary Section 43B expenses (like tax, duty, bank interest) are exempted if they are paid before the due date of filing Income Tax Return (ITR). But this exemption till return filing is not applicable on MSME payments i.e. 43B(h). The amount that remains outstanding till March 31 and has crossed the deadline will be directly added to the profit of the same year. It is now mandatory to disclose this separately in Form 3CD.
From Form 3CD to bring the audit report in line with the modern tax system Clause 28 and Clause 29 have been completely omitted..
Clause 28 contained the old rules relating to reporting of shares acquired without consideration or for inadequate consideration, while Clause 29 dealt with the issue of shares at more than fair market value. After the removal of these two clauses, auditors no longer have to feed any data in this section.
Clause 31 has been made overly broad to prohibit cash transactions and hawala transactions. Mere amount and name will no longer be sufficient in reporting loans, deposits and their repayments of Rs 20,000 or more under sections 269SS and 269T.
Now the auditor is required to specify for each transaction Nature and Mode Codes Have to enter. It must be clarified that the transaction:
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done in cash,
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Non-account payee through cheque/draft,
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by way of transfer/conversion of an asset or liability,
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Or debited/credited only through journal entry (account adjustment).
Latest clause added in Form 3CD Clause 36B Is. This clause has been brought in to keep an eye on the receipts related to share buyback.
If the taxpayer has received any amount on buyback of shares covered under section 2(22)(f) of the Income Tax Act, the auditor will have to record two main details in this new clause:
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What was the total amount received on buyback?
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What was the actual cost of acquisition of those buyback shares?
From major industrial and business hubs of Uttar Pradesh—like Lucknow (Aminabad, Transport Nagar, Hazratganj), Kanpur (Mal Road, Fazalganj Industrial Area), Noida, Ghaziabad, Varanasi and Agra—to Delhi-NCR and Mumbai, chartered accountants’ offices are witnessing huge work pressure.
Particularly due to the MSME clause (Clause 22 and 26), small manufacturers and wholesalers have to reconcile the Udyam Aadhar certificates of all their suppliers and invoice-wise pendency as on March 31. Businesses who have not made timely payments to MSME suppliers may face heavy tax assessments.
In case the tax audit report is not filed online by 30th September, you will be liable for penalty under the Income Tax Act. Section 271B There is a provision for punitive action under. According to this:
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of total business/turnover 0.5%Or
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maximum ₹1,50,000 (one and a half lakh rupees)—Whatever is less, may be imposed on the taxpayer as penalty.
Additionally, if the audit report is not submitted on time, the final Income Tax Return (ITR) to be filed by October 31 may also be affected and the taxpayer will not be allowed to carry forward losses. Therefore, businessmen should immediately contact their CA and finalize their accounts as per these 8 new clauses.