Latest Amendments in Form 3CD: Practical Insights for FY 2024-25 Audits

The Central Board of Direct Tax (CBDT) issued a notification dated March 28, 2025, changed Form 3CD via the Income tax Eighth- Amendment Rules, 2025. The above will be effective from April 1, 2025, these changes impact audits for FY 2024-25 (AY 2025-26).

The e-filing portal has uploaded Form 3CA-3CD/3CB-3CD and released a new offline scheme and utility.

Clauses with amendments:

Clause 12 – Presumptive Income Coverage Expanded

Section 44BBC nonresident cruise ship operators has been added to the presumptive income list. For example, if a foreign cruise company (operating in India) selects for presumptive taxation under 44BBC, the auditor should now mention this section in Clause 12.

Clause 19 – Deduction Rows Removed

The main purpose of this is to eliminate Rows for 32AC, 32AD, 35AC, and 35CCB, as these deductions are no longer available. For example, if a client earlier claimed a deduction under section 35AC for expenditure on eligible social projects, the auditor should not report this anymore, as the section has been withdrawn.

Clause 21(a)- Settlement Payments under section 37 (1)(iv)

The purpose of this is to report expenses incurred to settle offences under any law. For example, A company paid Rs 10 lakh to settle a pollution control violation with the Pollution Board. This settlement amount is disallowed under Section 37(1)(iv) and must be separately reported in Clause 21(a).

Clause 22 – MSME Payments and Section 43B(h)

MSME stands for Micro, Small, and Medium Enterprises. It’s a classification used in India to categorize businesses based on their investment in plant, machinery or equipment, and their annual turnover.

Auditors should now report MSME payments in detail:

• Interest disallowed under section 23 of the MSME Act and
• Total payable to micro/small enterprises during the year
• Break-up of payments within time vs. beyond time (disallowed under section 43B(h))

Auditors should get a list of creditors from the client and check in which cases clause 43B(h) is not applicable; cases are mentioned below:

1. Opening creditors
2. Not registered under MSME
3. If the client adopted cash system accounting
4. Registered under MSME, but as Traders
5. If payment is done before March 31
6. Creditors of Capital Assets

Clause 26 – Alignment of Section 43B

Section 43B of Income Tax Act is concerned with profits and gains of business or profession PGBP. Under this clause the language updated to clarify “pay by due date” rule excludes MSME payments. For example, an employer pays a PF contribution of Rs 200,000 after the deadline under the PF Act but before the ITR filing deadline. It is allowed under Section 43B. But if an MSME invoice is delayed, even if paid before filing a return, it is not allowed for that year.

Clauses 28 and 29 – Deleted

Reporting of deemed income under Section 56(2) (viia): this is merged under Sections 56(2) (x) and 56(2) (viib), and the Angel Tax is removed. Example, if a company issued shares above FMV and received a premium, the auditor had to report under Clause 29.

Clause 31 – Loans/Deposits Reporting with Mode Codes

For Sections 269SS and 269T, the auditor must specify the mode of transaction using codes. Should complete the following list as a drop-down in the audit form:

• Each transaction must now carry this code in the report.
• Client accepted a loan of Rs 1 lakh in cash (Code “A”).
• Client repaid a loan of Rs 2 lakh by journal entry (Code “I”).

Earlier in case of journal entries there was no mentioned option for these transactions. However, now the new amendment has launched a drop down selection system using predefined codes.

Clause 36B – Buyback Receipts (New Clause)

This new clause is introduced to disclose:

• Amount received on buyback and
• Cost of acquisition of shares bought back

Main objective of the above clause is to make sure the better traceability of such transactions and helps tax department to identify such cases

Implications for Auditors

• MSME registration is now compulsory for audit working papers.
• Buyback transactions need additional documentation.
• Disallow settlement/compounding expenses separately.
• Remove obsolete deductions reporting from workpapers.
• Always update to the latest offline scheme before filing.
• Capture mode codes for loans/deposits to avoid schema errors.

The recent amendments are mainly introduced align Form 3CD with current provision of the Income Tax Act to enhance transaparency and to ensure effective implementation