Know what changed in Tax Audit Form 3CD and ITR 6
There are various kinds of audits being conducted under different laws such as company audit, statutory audit conducted under company law provisions, cost audit, stock audit etc. Similarly, income tax law also mandates an audit called ‘Tax Audit’. Section 44AB of the Income-tax Act, 1961 contains the provisions for the tax audit of an entity. As per these provisions, tax audit shall be conducted by a Chartered Accountant who ensures that the taxpayers have maintained proper books of account and complied with the provisions of the Income-tax Act.
Tax Audit conducted by a Chartered Accountant is reported to the Income-tax department as follows:
The audit report has to be furnished in either of the following forms:
- Form 3CA – In respect of a taxpayer carrying on a business or profession and who is already mandated to get his accounts audited under any other law (i.e. law other than income tax law). A company is required to get its accounts audited compulsorily under Companies Act 2013. So, it will furnish Form 3CA.
- Form 3CB – In respect of a taxpayer carrying on a business or profession but who is not required to get his accounts audited under any other law. A proprietorship entity or partnership firm, having turnover of not more than 1 crore and not opting for presumptive income scheme, is not required to get its accounts audited under any other law except income tax. So, it will furnish Form 3CB.
- Form 3CD – The statement of particulars would be as per Form 3CD. This Form various clauses where the auditor has to report on the various matters contained therein. These clauses have been divided into two parts – Part A covers the basic factual details about the assessee and Part B contains the particulars of various compliances under the income tax laws that need to be furnished
CBDT vide Notification No. 82/2020-Income Tax notified certain changes in Form 3CD, Form No 3CEB and ITR6.
The CBDT made the following changes in Form 3CD:
Serial number 8a inserted after Serial number 8 in Part A
- Serial number 8a shall be “Whether the assessee has opted for taxation under section 115BA/115BAA/115BAB?”
- Section 115BAA provides the option to certain domestic companies to pay tax at 22%, subject to the conditions mentioned in the said section.
- Section 115BAB provides the option to new domestic manufacturing domestic companies an option to pay tax at 15%, subject to the conditions mentioned in the said section.
- Section 115BA would apply to companies other than those mentioned in sections 115BAA and 115BAB. Section 115BA provides that the total income of a newly set up domestic company engaged in business of manufacture or production of any article or thing and research in relation thereto, or distribution of such article or thing manufactured or produced by it, shall, at its option, be taxed at the rate of 25% subject to conditions specified therein
- So basically, an assessee who has opted to pay tax as per the above section will report the same under Serial number 8 in Part A
The below mentioned clauses were inserted after Clause (c) of Serial number 18 in Part B
- Clause (ca) Adjustment made to the written down value under section 115BAA (for assessment year 2020-21 only)
- Clause (cb) Adjusted written down value
In serial number 32, for clause (a), the following clause shall be substituted in Part B
Clause (a) Details of brought forward loss or depreciation allowance, in the following manner, to the extent available:
|Sl No||Assessment Year||Nature of loss/ allowance (in rupees)||Amount as returned (in rupees)||All losses/ allowances not allowed under section 115BAA||Amount as adjusted by withdrawal of additional depreciation on account of opting for taxation under section 115BAA||Amounts as assessed (give reference to relevant order)||Remarks|
The CBDT made the following changes in Form 3CEB:
Before we move forward, let us first understand what is Form 3CEB. Form 3CEB under transfer pricing regulations, is basically filled by the company with form 3CD under sec 92A TO 92F of Income Tax Act. Form 3CEB is mandatory to be filled if the company is engaged in any of the international transaction with any associate enterprise. In form 3CEB, one has to provide details of all the international transaction and some specified domestic transactions with associated enterprises.
Now let us move to the changes made by CBDT in Form 3CEB
- Serial number 22 and the entries relating thereto of Part C shall be omitted
- Serial numbers 23 and 24 of Part C shall be re-numbered as serial numbers 22 and 23 respectively
- After serial number 23 of Part C as so renumbered, Serial number 24 shall be inserted
Serial Number 24 shall be as follows:
|Particulars in respect of specified domestic transaction in the nature of any business transacted between the persons referred to in sub-section (6) of section 115BAB: Has the assessee entered into any specified domestic transaction(s) with any persons referred to in sub-section (6) of section 115BAB which has resulted in more than ordinary profits expected to arise in such business? If “yes”, provide the following details: Name of the person with whom the specified domestic transaction has been entered intoDescription of the transaction including quantitative details, if anyTotal amount received/receivable or paid/ payable in the transaction – (i) as per books of account (ii) as computed by the assessee having regard to the arm’s length price.Method used for determining the arm’s length price [See section 92C(1)].||Yes / No|
The CBDT made the following changes in ITR 6:
Before we move forward, let us first understand what is ITR 6. ITR 6 is an income tax return form that is used by companies to e-file income tax return if they do not claim exemption under Section 11 of the Income Tax Act, 1961. Under existing Income Tax rules, companies that can claim exemption u/s 11 are those who have income from property that is held for charitable or religious purposes.
Now let us move to the changes made by CBDT in ITR 6 relating to assessment year 2020-21.
- In Schedule DPM (Depreciation on plant and machinery), after serial number 3 and the entries relating thereto, the following shall be inserted:
- Serial Number 3a – Amount as adjusted on account of opting for taxation section 115BAA
- Serial Number 3b – Adjusted Written down value on the first day of previous year (3) + (3a)
- In Schedule DPM (Depreciation on plant and machinery), for serial number 5, the following shall be substituted – Consideration or other realization during the previous year out of 3b or 4
- In Schedule DPM (Depreciation on plant and machinery), for serial number 6, the following shall be substituted – Amount on which depreciation at full rate to be allowed (3b + 4 -5) (enter 0, if result is negative)
- In Schedule DPM (Depreciation on plant and machinery), for serial number 20, the following shall be substituted – Capital gains/ loss under section 50 (5 + 8 -3b – 4 -7 – 19) (enter negative only, if block ceases to exist)
- Schedule CFL pertaining to Details of losses to be carried forward to future years has been substituted
- Schedule UD pertaining to Unabsorbed depreciation and allowance under section 35(4) has been substituted
CBDT has also inserted Form 10-IE which pertains to Application for exercise/ withdrawal of option under clause (i) of sub-section (5) of section 115BAC of the Income-tax Act, 1961 and Form No. 10-IF which pertains to Application for exercise of option under sub-section (5) of section 115BAD of the Income-tax Act, 1961.