• Notification Date: 23-09-2024
• Notification No: N/A

Form 3CD Tax Audit Report: Explanation and Applicability

For taxpayers, the period from June to September is particularly stressful as they have to compile all their financial data for the previous financial year and calculate their final tax liability. Based on this, the taxpayer’s tax return is determined. 

The limit for a “tax audit” under Section 44AB is Rs 5 crore (if at least 95% of business transactions are accompanied digitally, the threshold is Rs 10 crore). This procedure becomes even more cumbersome, as in case a taxpayer is audited, he/she has to submit not only the tax return but also the tax audit report to the Income Tax Department. In this framework, we would assuredly have heard or come across “Form 3CD." Let us discuss the following parts related to Form 3CD.   

Tax Audit Form:  

The Income Tax Department has prescribed two types of forms for tax audits:  

Audit Report: The audit report can be either Form 3CA or Form 3CB. Form 3CA is for individuals whose accounts have been audited under any law other than the Income Tax Act. Form 3CB is for people whose accounts have not been audited under any other law, those who are audited under the Income Tax Act. 

Statement Details: The statement details are prepared as per Form 3CD and are also the focus of this article. This form contains a whole of 44 clauses in which the auditor has to report on numerous matters contained therein. These clauses are divided into two parts: Part A and Part B." 

Part A describes the basic facts about the taxpayer. 

Part A describes the basic facts about the taxpayer. 

Part B contains details of various requirements under the Income Tax Act that need to be specified; there are mentioned multiple details that are required. 

Clause-wise summary of Form 3CD 

1. Name of assessee and address 

These are the basic details to identify the assessee. Please note that if the audit is in respect of a branch, the name and address of that branch should be provided. 

2. Status 

This refers to the various types of taxpayers covered under this Act: individuals, Hindu undivided families (HUF), companies, enterprises (including LLPs), and associations of persons (AOP), bodies of individuals (BOI), local government authorities, and artificial legal entities. 

3. State the relevant provision of Section 44AB on the basis of which the audit has been conducted 

You should select the applicable provision [(a) to (e)] of Section 44AB on the basis of which the audit has been conducted. 

What is the limit for Form 3CD? 

The tax limit under 44AB is Rs 5 crore. However, if 95% of the transactions are digital, the threshold will be Rs 10 crore.This is limit of form 3CD. 

Conclusion of Form 3CD 

Taxpayers are responsible for ensuring that their accounts are audited. Auditors must examine the taxpayer's books and record their findings in a tax audit report. Providing accurate information is important to avoid proceedings.