Tax Audit Under Section 44AB For AY 2022-23

[2022] 142 taxmann.
com 88 (Article)
76 FAQs on Tax Audit under section 44AB for AY 2022-23
FAQ 1. What is a tax audit?
A tax audit is a process to verify whether the books of accounts prepared by a taxpayer comply with the
generally accepted accounting principles and the provisions of the Income-tax Act. It is intended to
ensure that the books of account and other records are properly maintained and correctly compute the
taxpayer's true income. Such an audit also helps in checking fraudulent practices. A tax audit does not
give the assessee any immunity from scrutiny assessment or disallowance of expenses1. A tax audit can
be conducted only by a Chartered Accountant in practice.
FAQ 2. In which form the tax audit report has to be obtained?
The tax audit report has to be furnished in the forms prescribed below:
Category of Taxpayer Form for Audit Annexure to Audit

Report Report
If the books of account of the assessee are required to be audited Form 3CA Form 3CD
under any other law
In any other case Form 3CB Form 3CD
Form No. 3CA/3CB is a format of audit report, whereas Form 3CD is a Statement of particulars
required to be furnished under section 44AB of the Income-tax Act.
If the assessee is required to get his books of accounts audited under any other law, it is sufficient for
him to get his accounts audited under that law and furnish a report of such audit and a report in form
3CA and 3CD by a Chartered Accountant by the prescribed due date.
FAQ 3. Who is required to get books of accounts audited?
Section 44AB provides for the audit of books of accounts of an assessee engaged in business or
profession. The table below enumerates the requirement to get the books of accounts audited by
different taxpayers:
Nature of Business or Category of Taxpayer When is the audit mandatory?

Profession
Any professions (specified or Any If gross receipts from the profession
non-specified) during the relevant previous year
exceed Rs. 50 lakhs.
Business Both payment and receipt in cash do If total sales, turnover or gross receipt
not exceed 5% of the total receipts from the business during the previous
and payment, respectively. year exceeds Rs. 10 crores.
Either payment or receipt in cash If total sales, turnover or gross receipt
exceeds 5% of the total receipts and from the business during the previous
payment, respectively. year exceeds Rs. 1 crore
Business eligible for Resident Individual or HUF If the assessee's income exceeds the
presumptive tax scheme under maximum exemption limit and he has
section 44AD opted for the scheme in any of the
last 5 previous years but does not opt
for the same in the current year.
Business eligible for Resident Partnership Firm (Excluding The taxpayer has opted for the
presumptive tax scheme under LLP) scheme in any of the last 5 previous
section 44AD years but does not opt for the same in
the current year.
Profession eligible for Resident Individual or partnership firm The taxpayer claims that profits from
presumptive tax scheme under (Excluding LLP) the profession are lower than the
section 44ADA profits computed under section
44ADA, and the total income exceeds
the maximum exemption limit.
Business eligible for Any Assessee engaged in plying, The taxpayer claims that the profits
presumptive tax scheme under hiring or leasing of goods carriage from the business are lower than the
section 44AE profit computed under section 44AE.
Business eligible for Non-resident assessee engaged in the The taxpayer claims that his profits
presumptive tax scheme under exploration of mineral oil from the business are lower than the
section 44BB profit computed under section 44BB.
Business eligible for Foreign Co. engaged in civil The taxpayer claims that his profits
presumptive tax scheme under construction from the business are lower than the
section 44BBB profit computed under section 44BBB.
The provisions for tax audit under section 44AB are not applicable in the case of an assessee who comes
within the purview of section 44B or section 44BBA.
FAQ 4. Is a tax audit required if turnover exceeds the specified limit, but total income is
below the maximum exemption limit?
Yes, the tax audit is mandatory. Section 44AB does not exempt an assessee from the tax audit simply
because its total income does not exceed the maximum exemption limit.
The objective of tax audit under section 44AB is to assist the Assessing Officer in computing the total
income of an assessee in accordance with different provisions of the Act. Therefore, even if the total
income of a person is below the maximum exemption limit, he will get his accounts audited and furnish
the audit report if any condition prescribed under section 44AB is satisfied.
FAQ 5. How to avail of the benefit of the enhanced limit of Rs. 10 crores for the tax audit?
The increased threshold limit of Rs. 10 crores shall be applicable only if cash receipts and cash
payments during the year do not exceed 5% of the total receipt or payment, respectively. In other words,
more than 95% of business transactions should be done through banking channels. It should be noted
that any payment or receipt by cheque drawn on a bank or by a bank draft, not being an account payee
cheque or draft, should be considered payment or receipt in cash. For example, any payment or receipt
by a bearer or crossed cheque (not an account payee cheque) should be considered as payment or
receipt in cash.
It may be noted that conditions in respect of 'amounts received' and 'payments made' should be fulfilled
separately. A threshold limit of 5% is prescribed separately for receipts/payments and should be applied
accordingly. It means that if one of the conditions is not satisfied, the enhanced turnover limit will not
apply.
The onus would be on the assessee to prove that he is eligible for an increased threshold limit for not
getting his accounts audited. He needs to ensure that his aggregate cash receipts and payments are
within the limit of 5%. If he fails to do so, the consequences would be a penalty under Section 271B for
failure to get accounts audited. However, if there is reasonable cause, then in terms of Section 273B,
such a penalty may not be imposed.
For example, Mr. A is engaged in the business of trading readymade garments. He has a turnover of less
than Rs. 10 crores during the financial year 2021-22. He made the following transactions during the
relevant year:
Particulars Mode of transaction

Cash (Rs. in lakhs) Bank (Rs. in lakhs)
Receipts
- Sales 20 480
- Advance from customers 10 20
- Unsecured loan 10 100
Total receipts 40 600
Payments
- Purchase 15 400
- Rent Nil 50
- Loan repayment 5 50
Total Payments 20 500
The turnover of Mr. A during the financial year 2021-22 is up to Rs. 10 crores. He shall not be liable for
tax audit if his cash receipt and payment during the year do not exceed 5% of the total receipt or
payment, as the case may be.
Computation of percentage of cash receipts & payments:
Particulars Total (A) Cash (B) % in cash (B/A*100)
Receipts 640 40 6.25%

Payments 520 20 3.85%
Though the payment made in cash during the year does not exceed 5% of total payments, the
percentage of cash receipts exceeds the limit of 5%. Thus, Mr. A is not entitled to the benefit of the
increased threshold limit of Rs. 10 crores for the tax audit. Hence, the tax audit is applicable.
FAQ 6. Can the professionals avail the benefit of the enhanced turnover limit of Rs. 10
Crore for the tax audit?
Clause (a) of Section 44AB talks about a person carrying on a business, whereas clause (b) talks about a
person carrying on a profession. The proviso to section 44AB providing the enhanced turnover limit of
Rs. 10 crores for the tax audit is placed below clause (a) to section 44AB. Thus, the persons engaged in
the profession are not entitled to claim an enhanced turnover limit of Rs. 10 crores for the tax audit.
FAQ 7. Whether a person opting for a presumptive taxation scheme under section 44AD
is required to get his accounts audited?
Section 44AB prescribes the conditions under which an assessee is required to get his accounts audited.
It excludes a person from getting books of account audited if he opts for a presumptive taxation scheme
under Section 44AD, provided the turnover of the business does not exceed Rs. 2 crores.
Clause (e) of Section 44AB states that a person, who has opted for the presumptive taxation scheme
under Section 44AD in any of the last 5 previous years, but does not opt for the same in the current
previous year, shall be liable to get his accounts audited if his total income exceeds the maximum
amount not chargeable to tax.
Clause (a) of Section 44AB provides for an audit of books of account if a person is engaged in a business
and the turnover of such business exceeds Rs. 1 crore. However, the threshold shall be increased to Rs.
10 crores if the cash receipt and payment do not exceed 5% of the total receipt and payment,
respectively.
If an assessee is covered under both the clauses, that is, clause (a) and clause (e) of Section 44AB, will
he be liable to get the books of account audited?
For example, if the turnover of an assessee is more than Rs. 1 crore and his cash payment and receipt
are less than 5%, is he liable for a tax audit?
Let's understand this with the help of the table below:
Situation* Turnover Whether liable for a tax audit?

The assessee has opted for Section Up to Rs. 1 crore Yes, if income is more than the maximum
44AD in any of the last 5 years but is not amount not chargeable to tax [Section
opting for the same in the current year. 44AB(e)]
Up to Rs. 2 crores
More than Rs. 2 crores No [Proviso to Section 44AB(a)]
but up to Rs. 10 crores.
More than Rs. 10 crores Yes
The assessee has not opted for Section Up to Rs. 10 crores No [Proviso to Section 44AB(a)]
44AD in any of the last 5 years and is not
opting for the same during the current
year as well.
More than Rs. 10 crores Yes
* Assuming cash receipts or payments do not exceed 5% of the aggregate amount received or paid
during the year.
It should be noted that Clause 8 of Form 3CD requires the auditor to provide the relevant clause under
which the tax audit has been conducted.
FAQ 8. Is a salaried employee required to get accounts audited if he is also doing trading
in derivatives such as futures and options?
The gains or losses arising from trading in F&O are always taxable under the head 'Profits and Gains
from Business or Profession'. Income or loss from dealing in F&O shall be deemed as normal business
income (non-speculative business) even though delivery is not affected in such transactions.
To check the applicability of tax audit in such cases, the turnover from trading in derivatives must be
computed first (Refer FAQ 16). The computation of turnover is an essential factor as the applicability of
a tax audit is determined based on turnover. If total sales, turnover or gross receipt from the business
during the previous year exceeds Rs. 1 crore, the tax audit shall be required in such cases. However, the
increased threshold limit of Rs. 10 crores shall be applicable if cash receipts and cash payments during
the year do not exceed 5% of the total receipt or payment, as the case may be. In other words, more than
95% of business transactions should be done through banking channels.
For example, during the year, Mr. A has earned salary income and incurred losses from trading in
futures and options (F&O). The details of his transactions are as under:
Transaction Buy Value Sell Value Realised P&L Computation of Turnover

Transaction 1 40,00,000 50,00,000 10,00,000 10,00,000
Transaction 2 60,00,000 30,00,000 (30,00,000) 30,00,000
Transaction 3 75,00,000 60,00,000 (15,00,000) 15,00,000
Transaction 4 3,20,00,000 2,00,00,000 (1,20,00,000) 1,20,00,000
Transaction 5 2,30,00,000 1,30,00,000 1,00,00,000 1,00,00,000
Total 7,25,00,000 4,70,00,000 (55,00,000) 2,75,00,000
The turnover, in this case, shall be Rs. 2,75,00,000, and the loss from F&O shall be Rs. 55,00,000. The
tax audit requirement arises if the business turnover from F&O exceeds Rs. 1 crore. However, the tax
audit shall not be required if more than 95% of business transactions are done through banking
channels, and turnover is less than Rs. 10 crores. Since in F&O transactions, the trading shall be
through digital means only, the enhanced limit of Rs. 10 crores shall apply to determine the
applicability of tax audit.
FAQ 9. Analysis of the applicability of tax audit under different scenarios in case of
professionals:
Case Gross Profit Whether tax audit Reason

Receipts applicable?
Case 1 40 Lakhs 25 No Gross receipts are less than Rs. 50 lakhs and profit
Lakhs is more than 50% of the gross receipts.
Case 3 40 Lakhs 10 Yes Profits are lower than 50% of total gross receipts,
Lakhs and total income exceeds the maximum exemption
limit.
Case 4 40 Lakhs 2 Lakhs No Although profits are less than 50% of total gross
receipts, but the total income is less than the
maximum exemption limit.
Case 5 70 Lakhs 50 Yes Gross receipts exceed Rs. 50 lakhs.
Lakhs
Case 6 70 Lakhs 15 Yes Gross receipts exceed Rs. 50 lakhs. The profit
Lakhs percentage is irrelevant here.
FAQ 10. Whether the provisions of tax audit apply to the Charitable/Religious Trust?
Sections 11 to 13 are special provisions governing the taxation of charitable or religious institutions.
Section 12A provides the conditions to be fulfilled by any trust or institution to claim an exemption
under Sections 11 and 12. Registration, maintenance of books of account, audit and filing of return of
income are the conditions to be fulfilled to claim the exemption under Sections 11 and 12. Once these
conditions are complied with, such an institution's income shall be computed as per Sections 11 and 12.
Section 11(4) provides that 'property held under trust' shall include a business undertaking, and Section
11(4A) provides an exemption of income from incidental business activities on fulfilment of the
specified conditions.
Nothing in the Act suggests that tax audit under Section 44AB shall apply to a business under Section
11(4A). Sections 11 to 13 are independent of the five heads of income. As long as the registration under
Section 12AA/12AB is intact, the income cannot be computed under the five heads of income.
Tax audit is a specific requirement for the assessee having income under the head 'Business and
Profession'. Therefore, there is no obligation on the charitable institutions to get the accounts audited
under Section 44AB. However, such organisations are subject to the audit under section 12A(1)(b) read
with Rule 17B, and a report of such audit is to be furnished in Form 10B.
Computation of Gross receipts or Turnover

FAQ 11. How to calculate the gross receipt or sales turnover for a tax audit?
Applicability of tax audit under Section 44AB depends upon gross receipts, sales, or turnover of an
assessee, so the foremost thing is their calculations.
(a) Sales turnover
As per 'Guidance Note on Terms Used in Financial Statements' published by the ICAI, the meaning of
the term' sale turnover' shall be the aggregate of the amount for which sales are affected by an
enterprise. The terms gross turnover and net turnover are sometimes used to differentiate the turnover
before and after deducting returns and discounts.
An invoice may involve various extra and ancillary charges. Some of these charges may form part of the
sale turnover, whereas some may be excluded while determining the value of sales turnover. The
treatment thereof is explained in the below table.
Particular Treatment
Trade discount or turnover discount To be excluded from sales turnover if discounts are allowed in
the sales invoice
Cash discount Not to be excluded from sales turnover
Special Rebate To be excluded from sales turnover if it is in the nature of trade
discount. If it is in the nature of commission on sales, the same
cannot be deducted from the figure of turnover.
Commission on sales Not to be excluded from sales turnover
Sales return To be excluded from sales turnover
Sale proceeds from the transfer of fixed assets To be excluded from sales turnover
Sale proceeds of property held as an To be excluded from sales turnover
investment
Sale proceeds from the transfer of securities Not to be excluded from sales turnover
held as stock-in-trade
Scrap To be excluded from sales turnover unless the assessee is
engaged in the business of dealing in scrap.
(b) Gross receipt
The term 'Gross Receipts' is not defined in the Income-tax Act. The 'Guidance Note on Tax Audit' issued
by ICAI provides that in the case of professionals, 'Gross receipts' includes all receipts arising from
carrying on a profession. However, there are certain receipts which may or may not be included in the
gross receipts, which are as follows.
Following receipts shall be included in the gross receipts:
(a) Out-of-pocket expenses, recovered by way of consolidated fees, would form part of
gross receipts.
(b) Cash assistance (by whatever name called) received or receivable by any person
against exports under any scheme of government.
(c) Any duty drawback is payable to any person against exports under specified
schemes.
(d) The aggregate gross interest income received by a money lender, commission,
brokerage, service, and other incidental charges received in the business of chit
funds.
(e) Reimbursement of expenses incurred (i.e., packing, forwarding, freight, insurance,
travelling, etc.). However, if the same is credited to a separate account in books, only
the net surplus on this account should be added to gross receipts or turnover.
(f) Hire charges of cold storage.
(g) Liquidated damages.
(h) Insurance claims, except those which are linked with fixed assets.
(i) Sale proceeds of scrap, wastage, etc., unless treated as part of sale turnover, whether
or not credited to a miscellaneous income account.
(j) Lease rent in the business of operating lease.
(k) Finance income to reimburse and reward the lessor for his investment and services.
(l) Hire charges and installments received in the course of hire purchase.
(m) Advance received and forfeited from customers.
(n) The value of any benefit or perquisite, whether convertible into money or not, arising
from business or exercise of a profession.
Following receipts shall be excluded from the gross receipts:
(a) Out-of-pocket expenses recovered separately from the client shall not form part of
gross receipts.
(b) Where a professional received an advance for services which are yet to be rendered,
it will not form part of the gross receipts till the services are rendered.
(c) Sale proceeds of fixed assets, including advance forfeited, if any.
(d) Sale proceeds of assets held as investments.
(e) Rental income unless the same is assessable as business income.
(f) Dividends on shares except in the case of an assessee dealing in shares.
(g) Income by way of interest unless assessable as business income.
(h) Reimbursement of customs duty and other charges collected by a clearing agent.
(i) The amount received by travel agents from clients for payment to airlines, railways
etc., is excluded if received by way of reimbursement of expenses incurred on behalf
of the client. If, however, the travel agent is conducting a package tour and charges a
consolidated sum for transportation, boarding and lodging and other facilities, then
the amount received from the members of the group tour should form part of gross
receipts.
(j) The amount of advertising charges recovered by an advertising agent from his clients
by way of reimbursement shall be excluded. However, if he books the advertisement
space in bulk and recovers the charges from different clients, the amount recovered
by him will form part of his gross receipts.
(k) Share of profit of a partner in the total income of the firm shall be excluded from the
total income of the partner.
(l) Write back amounts payable to creditors or provisions for expenses or taxes no
longer required.
In case of sale by a commission agent or by a person on a consignment basis, if the property in goods or
all significant risks and rewards of ownership of goods continue to belong to the principal, the relevant
sale price shall not be part of the turnover of the commission agent. In this case, the turnover shall be
the amount of commission earned by the agent. However, if the property in the goods, significant risk
and reward of ownership belongs to the commission agent, the sale price received/receivable shall form
part of his turnover.
FAQ 12. How to calculate the turnover of the commission agent?
Turnover of a commission agent or a person selling goods on a consignment basis is determined

concerning the transfer of significant risk or reward of ownership. If the property in goods or all
significant risks and rewards of ownership of goods continue to belong to the principal, the relevant sale
price shall not form part of the turnover of the commission agent. In this case, the turnover shall be the
amount of commission earned by the agent. However, if the property in the goods, significant risk, and
reward of ownership belong to the commission agent, the sale price received/receivable shall form part
of his turnover.
ICDS-IV (Revenue Recognition) also provides that in the case of an agency relationship, the revenue of
an agent shall be the amount of commission and not the gross inflow of cash, receivables or other
consideration. The CBDT2 has also clarified that while determining the turnover in the case of Kachha
Arahtias, the turnover does not include the sales effected on behalf of the principals and only the gross
commission has to be considered. However, in the case of Pucca Arahtias, the total sales/turnover of the
business should be taken into consideration.
FAQ 13. How to calculate the turnover of a share broker?
When a share broker purchases securities on behalf of his customers, he does not get them transferred
in his name, but they are delivered in the name of the customer. The same is true in the case of sales
also. The share broker holds the delivery merely on behalf of his customer. The property in securities
does not get transferred to the share-brokers. Only brokerage, which is being accounted for in the books
of share brokers, should be considered for calculating the turnover. However, in the case of transactions
entered into by a share broker on his personal account, the sale value should be considered while
calculating the sales turnover. The case of a sub-broker is not different from that of a share broker.
FAQ 14. How to calculate the turnover in case of a speculative transaction?
A 'speculative transaction' means a transaction in which a contract for purchase or sale of any
commodity or securities is periodically or ultimately settled otherwise than by the actual delivery or
transfer of commodity or scrips. Thus, in speculative transactions, both positive and negative
differences can arise from the settlement of contracts. Each transaction, whether resulting in a positive
or negative difference, is an independent transaction. In such transactions, though the contract notes
are issued for the full value of the purchased or sold asset, the entries in the books of account are made
only for the differences. Accordingly, the aggregate of both positive and negative differences is
considered as the turnover.
For example, Mr X is an assessee engaged in speculative business. He derives the following profits or
losses while dealing in securities:
Securities Amount of gain or (loss)

A 15,000
B (24,000)
C (14,200)
D 16,000
Total 69,200
While computing the turnover of Mr X, all the differences, whether positive or negative, shall be
aggregated.
FAQ 15. How to calculate the turnover in the case of derivatives?
The gains or losses arising from trading in F&O are always taxable under the head 'Profits and Gains
from Business or Profession'. The derivative transactions are completed without delivery of shares or
securities, and they are squared up by the payment of differences. A derivatives transaction has all
features which a speculative transaction has.
The Income-tax Act does not contain any provision or guidance for computation of turnover in F&O
trading. However, the Guidance Note on Tax Audit issued by the ICAI prescribes the method of
determining turnover, which shall be as under:
(a) The total of favourable and unfavourable differences is taken as turnover.

(b) Premium received on the sale of options is also included in turnover. However,
where the premium received is included for determining net profit for transactions,
the same should not be included separately.
(c) In respect of any reverse trades, the difference thereon should also form part of the
turnover.
All the favourable or unfavourable differences are aggregated to calculate the turnover.
For example, Mr. A enters into the following transaction during the financial year:
Security name Type Premium received Buy Amount Sell Amount Profit/(Loss)
Cipla Futures - 7,47,500 8,05,000 57,500
Nifty Call - 3,375 6,000 2,625
BHEL Call - 41,600 20,800 (20,800)
ONGC Futures - 3,48,500 3,28,000 (20,500)
IOC Put (Sell) 500 - - 500
ITC Put (Sell) 1,000 4,000 (Square Off Price) - (3,000)
Reliance Ltd. Put - 4,500 2,500 (2,000)
In derivative transactions, the aggregate of both favourable and unfavourable differences (i.e., income
and loss) is considered as the turnover. Further, the premium received on the sale of options is also
included in turnover if the same is not included while determining the net profit or loss from the
transaction. Thus, the turnover of Mr A shall be as follows:
Security Name Profit/(Loss)

Cipla 57,500
Nifty 2,625
BHEL (20,800)
ONGC (20,500)
IOC 500
ITC* (3,000)
Reliance Ltd. (2,000)
Total Turnover 1,06,925
* As the amount of premium received is already considered for computing the profit or loss from the transaction,
it is not included again while computing the turnover.
FAQ 16. How to calculate turnover in the case of multiple businesses?
Where an assessee is carrying on more than one business, sale turnover or gross receipts from all
businesses shall be clubbed together. However, if the assessee is opting for the presumptive taxation
scheme, the turnover of such businesses shall be excluded while determining his total sales turnover or
gross receipts.
FAQ 17. How to check the threshold limit if the assessee is carrying on business and
profession?
The ICAI in the guidance note on tax audit provides that if an assessee is carrying on a business and a
profession, then a tax audit is required if turnover/receipts from either business or profession exceed
the prescribed threshold limit.
For example, the professional receipts of an assessee are Rs. 54 lakhs, and the total turnover from the
business are Rs. 72 lakhs. It will be necessary for him to get the accounts of the profession and business
audited because the gross receipts from the profession exceed Rs. 50 Lakhs.
Similarly, if the professional receipts are Rs. 42 lakhs and total turnover from business are Rs. 86 lakh.
In this circumstance, as the gross receipt or turnover from a profession or business does not exceed the
limits specified in Section 44AB, there is no need to conduct a tax audit.
FAQ 18. Whether GST shall be included while calculating the gross turnover or receipt?
Section 145A provides for the inclusion of taxes, cess, etc., in the value of sale, purchase, and inventory.
However, the purpose of this provision is limited to the calculation of income taxable under the head
'Profits and Gains from Business or Profession'. Whether this provision can be applied for the
calculation of 'sales turnover' for Section 44AA, Section 44AB, Section 44AD, and Section 44ADA has
always been a matter of disagreement between the revenue and taxpayer.
Where an assessee has opted for Composition Scheme under the GST Act, the tax is not recovered from
the customer and is debited to the statement of profit & loss as an indirect expense. Thus, the amount of
GST paid by an assessee does not form part of his gross turnover. In the case of other assessees, as GST
is charged from the customer and is recognised separately in the books of accounts, it is not clear
whether the amount of GST shall be included in the turnover for calculation of taxable income only (as
provided by Section 145A) or for every other provision which has a reference to 'turnover'. Unless the
CBDT clarifies its stand on this matter, it would be appropriate to ignore the amount of GST while
calculating the gross turnover or gross receipts because of the following reasons:
(a) Section 145A begins with 'for the purpose of determining the income chargeable
under the head Profits and gains of business or profession', which makes this
provision inapplicable for other purposes.
(b) If GST recovered from the customer is credited to Current Liability Accounts
(Output CGST or Output IGST or Output SGST) and payments to the authority are
also debited to the said separate account, these should not form part of the turnover
shown in profit and loss account. ICAI's Guidance Note on Tax Audit also confirms
that if tax recovered is credited to a separate account, they would not be included in
the turnover.
(c) Inclusion of GST in the turnover would have a cascading effect, as presumptive
income would be computed on the component of GST, which is never treated as
income of the assessee.
(For detailed analysis and illustrations on the valuation of sale, purchase, and inventory, refer to
'Treatment of Tax paid on Goods (Inclusive v. Exclusive Approach)')
Due Date & Process to file Tax Audit Report

FAQ 19. What are the due dates for filing of tax audit report?
For the Assessment Year 2022-23, the due date for furnishing of tax audit report would be as under:
Type of Assessee Assessment Due date of tax audit Due date for furnishing
year report of ITR
Company 2022-23 30-09-2022 31-10-2022
Any other person who is obliged to furnish 2022-23 30-09-2022 31-10-2022
the tax audit report
Any person who is subject to the transfer 2022-23 31-10-2022 30-11-2022
pricing provisions
FAQ 20. How to furnish the tax audit report to Income-tax Dept.?
The Chartered Accountant shall file the audit report electronically directly at
https://www.incometax.gov.in. However, to furnish the report, the assessee has to authorise and
appoint the Chartered Accountant from his e-filing account.
The date of approval of the report by the taxpayer is considered the date of filing of the Audit Report. If
the assessee does not accept/approve, the tax audit report will be considered pending as if it has not
been filed.
FAQ 21. How many tax audit reports a Chartered accountant can Sign?
A Chartered Accountant in practice can conduct 60 tax audits relating to an assessment year.
The ICAI had clarified that an audit prescribed under any statute which requires the assessee to furnish
an audit report in the form as prescribed under Section 44AB of the Income-tax Act shall not be
considered for reckoning the specified number of tax audit assignments if the turnover of the auditee is
below the turnover limit specified in Section 44AB of the Income-tax Act. The ICAI modified the
guidelines on 23-08-2018 to provide that the audits conducted under Sections 44AD, 44ADA, and 44AE
(Presumptive Taxation Schemes) shall not be considered for reckoning the 'specified number of tax
audit assignments.
FAQ 22. If there are 10 partners in a firm of Chartered Accountants, then how many tax
audit reports can each partner sign in a financial year?
As per Chapter VI of Council General Guidelines, 2008 (Tax Audit Assignments under Section 44AB of
the Income Tax Act, 1961), a chartered accountant in practice shall not accept more than the specified
number of tax audit assignments in a financial year.
As per the guidelines, if there are 10 partners in a firm of Chartered Accountants in practice, then all the
partners of the firm can collectively sign 600 tax audit reports. This maximum limit of 600 tax audit
assignments may be distributed between the partners in any manner whatsoever. For instance, 1
partner can individually sign 600 tax audit reports. However, the remaining 9 partners are not eligible
to sign any tax audit report.
FAQ 23. Does the tax auditor need to generate UDIN for the tax audit report?
Chartered Accountants with a full-time Certificate of Practice can register on UDIN Portal
www.udin.icai.org and generate UDIN by registering the certificates attested/certified by them. UDIN is
an 18-digit system-generated unique number for every document certified/attested by practicing
Chartered Accountants. UDIN has been made mandatory on all Corporate/ Non-Corporate Audit,
Attest, and Assurance Functions.
While issuing the tax audit report under section 44AB of the Income-tax Act, 1961, the auditor should
generate an appropriate UDIN, and the same is also required to be updated at the e-filing portal. The
Chartered Accountant has to generate and update the UDIN within 60 calendar days from the date of
form submission on the income tax e-filing portal. If not updated within the 60 days, the department
will treat such audit report/certificate as invalid submission.
FAQ 24. Whether a tax audit report can be revised?
'Guidance Note on Tax Audit under Section 44AB' issued by the ICAI provides that the audit report
under section 44AB should not normally be revised. However, sometimes a member may be required to
revise his tax audit report on grounds such as:
(a) Revision of accounts of a company after its adoption in the annual general meeting.
(b) Change of law, e.g., retrospective amendment.
(c) Change in interpretation, e.g., CBDT Circular, Judgments, etc.
Thus, a tax audit report, once filed, can be revised on the grounds mentioned above.
Further, the CBDT has notified3 that if there is a payment by a person after furnishing of original report
which necessitates a recalculation of disallowance under Section 40 or Section 43B, a revised audit
report can be obtained from an accountant and furnished before the end of the relevant assessment
year for which the report pertains,
Thus, after issuing the audit report, but before the due date for filing the return, the assessee may make
payment of TDS or of tax, duty, cess, fee, or other payments referred to in Section 43B, and file the
revised audit report.
FAQ 25. Is there any penalty for the late filing of the audit report?
As per Section 271B, if any person fails to get his accounts audited or fails to furnish the report of the
audit, the Assessing Officer may direct such person to pay a penalty of a sum equal to lower of
following:
(a) 0.5% of the total sale, turnover, or gross receipts; or

(b) Rs. 1,50,000
However, no penalty shall be imposed if such failure is due to a reasonable cause.
FAQ 26. Can a tax auditor be held responsible if he does not complete the audit within
the specified date?
The Guidance Note on Tax Audit issued by the ICAI clarifies that the responsibility of the tax auditor
will depend on the facts and circumstances of the case. Normally, it is the professional duty of the
Chartered Accountant to ensure that the audit accepted by him is completed before the due date. If
there is any unreasonable delay on his part, he is answerable to the Institute if a complaint is made by
the client. However, if the delay in the completion of the audit is attributable to the client, the tax
auditor cannot be held responsible. It is, therefore, necessary that no Chartered Accountant should
accept audit assignments that he cannot complete within the prescribed time frame.
Disclosure & Reporting in Form 3CD

FAQ 27. Should the reporting in Form 3CD be made as per books of account or after
adjustment as per the Income Computation & Disclosure Standards (ICDS)?
The preamble of the ICDS provides that the ICDSs are applicable for computation of income chargeable
under the head ' profit and gains of business or profession' or 'Income from other sources' and not for
maintenance of books of accounts.
Further, the CBDT4 has clarified that the books of account are to be maintained in accordance with the
accounting policies applicable to the assessee. Thus, it can be concluded that the reporting in Form 3CD
shall be in accordance with the books of account maintained by the assessee. Any adjustment made to
profit or loss under the ICDS shall be reported in Clause 13 of Form 3CD.
FAQ 28. Who has to follow ICDS?
In exercise of the powers conferred by Section 145(2) of the Income-tax Act, 1961, the Central
Government has notified5 the Income Computation and Disclosure Standards (also referred to as
ICDS). ICDSs have been issued to bring uniformity in the accounting policies governing the
computation of income for taxability under the Income-tax Act and to reduce litigations.
Every assessee earning income taxable under the head ' profit and gains from business or profession' or
'Income from other sources' or both is required to compute taxable income in accordance with notified
ICDS. However, the ICDS shall be followed only if the assessee maintains accounts per the 'Mercantile
system' of accounting.
There is no threshold limit on the amount of turnover or taxable income for the applicability of ICDS.
Thus, every assessee earning business income or residuary income shall be required to follow ICDS for
the computation of income. The applicability of ICDS shall be subject to certain exceptions.
The CBDT has clarified2 that the general provisions of ICDS shall apply to all persons, including banks,
NBFCs, insurance companies, etc., unless there are sector-specific provisions contained in the ICDS or
the Act. For example, ICDS-VIII (Securities) contains specific provisions for banks and certain financial
institutions, and Schedule I of the Act contains specific provisions for the insurance business.
Exception 1: Exemption to Individual or HUF not liable for tax audit
An Individual or HUF, who is not required to get his books of account audited for the previous year
under section 44AB, shall not be required to comply with the requirements of ICDS.
A person opting for a presumptive taxation scheme is not required to maintain the books of account and
get them audited. In this regard, the CBDT has clarified6 that the relevant provisions of ICDS shall
apply to the persons (other than Individuals or HUF) opting for a presumptive taxation scheme. For
instance, for computing the presumptive income of a partnership firm under section 44AD of the Act,
the provisions of ICDS on construction contracts or revenue recognition shall apply for determining the
receipts or turnover, as the case may be.
Exception 2: Exemption for MAT Computation
The CBDT has clarified8 that the provisions of ICDS are applicable for the computation of income under
the regular provisions of the Act. As MAT is computed on 'book profit' that is net profit as shown in the
Profit and Loss Account prepared under the Companies Act subject to certain specified adjustments, the
provisions of ICDS shall not apply to the computation of MAT. However, where the assessee is liable to
pay AMT under the provisions of Section 115JC, the provisions of ICDS shall be applicable for the
computation of AMT as AMT is computed on adjusted total income, which is derived by making
specified adjustments to total income computed as per the regular provisions of the Act.
FAQ 29. Who is required to maintain books of accounts as per Section 44AA?
Section 44AA provides for maintenance of books of account by an assessee under the Income-tax Act.
The table below demonstrates the requirement for maintaining books of accounts by different
taxpayers:
Nature of Business or Category of Taxpayer Threshold Limits Threshold Limits for Gross
Profession for Income Turnover or Receipts
Specified Professions* Any - Mandatory in every case except
when presumptive taxation
scheme under Sec. 44ADA is
opted by the assessee.
Non-Specified Individual or HUF Rs. 2,50,000 Rs. 25 lakhs in any 3 years
Professions immediately preceding the
previous year.
Non-Specified Others Rs. 1,20,000 Rs. 10 lakhs in any 3 years
Professions immediately preceding the
previous year.
Business Individual or HUF Rs. 2,50,000 Rs. 25 lakhs in any 3 years
immediately preceding the
previous year.
Business Others Rs. 1,20,000 Rs. 10 lakhs in any 3 years
previous year.
Presumptive Tax Resident Individual or HUF Rs. 2,50,000 Taxpayer opted for the scheme in
Scheme under Sec. any of the last 5 previous years but
44AD does not opt for it in the current
year.
Presumptive Tax Resident Partnership Firm - Taxpayer opted for the scheme in
Scheme under Sec. any of the last 5 previous years but
44AD does not opt for it in the current
year.
Presumptive tax scheme Resident Assessee - Taxpayer claims that profits from
under Section 44ADA his profession are lower than those
computed under Section 44ADA
and total income exceeds the
maximum exemption limit.
Presumptive Tax Any Assessee engaged in - Taxpayer claims that his profits are
Scheme under Sec. plying, hiring, or leasing goods lower than the deemed profits.
44AE carriage
Presumptive Tax Non-resident assessee - Taxpayer claims that his profits are
Scheme under Sec. engaged in the exploration of lower than the deemed profits.
44BB mineral oil
Presumptive Tax Foreign Co. engaged in civil - Taxpayer claims that his profits are
Scheme under Sec. construction lower than the deemed profits.
44BBB
* Meaning of Specified Profession:
(a) Legal
(b) Medical
(c) Engineering
(d) Architectural
(e) Technical Consultancy
(f) Interior decoration
(g) Film artist7
(h) Authorised Representative8
(i) Accountancy Profession
(j) Company secretary9
(k) Information Technology10
** Where business or profession has been set up during the previous year, the threshold limit of income
or gross receipts of the current year shall be checked. In other words, in the case of a new business or
profession, if income or turnover or receipt of the current year, as the case may be, are not likely to
exceed the threshold limit, the assessee shall not be required to maintain the books of account.
FAQ 30. What documents should be maintained by the taxpayers to comply with the
requirement of maintenance of books of accounts as per Section 44AA?
The following documents should be maintained by the taxpayers to comply with the requirement of
maintenance of books of accounts:
Nature of Business or Threshold Limits Books of Accounts to be

Profession maintained
Specified Professions other Gross receipt exceeds Rs. 1. Cash-book
than company secretary and 1,50,000 in any of 3 years
Information technology immediately preceding the 2. Journal, if books of accounts are
previous year maintained according to the
mercantile system of accounting
3. Ledgers
4. Carbon copies of bills and carbon

copies or counterfoil of receipts
issued by the assessee of value
exceeding Rs. 25 (must be machine
numbered or serially numbered)
5. Original bills issued to the

assessee and receipts in respect of
the expenditures incurred by him
6. Signed vouchers, if bills and

receipts are not issued, and the
amount of expenditure does not
exceed Rs. 50, if the cash book does
not contain adequate particulars in
respect of these expenditures
Medical Professions Gross receipt exceeds Rs. 1. As specified above, for specified
1,50,000 in any of 3 years professions
previous year 2. Daily case register in Form 3C
3. Inventory under broad heads of

stock of drugs, medicines, and
other consumable accessories used
for the purpose of profession, as on
the first and last day of the previous
year.
Specified Professions In every case, irrespective of gross

Such books of accounts which may
receipts and Income enable the Assessing Officer to
compute the taxable income.
Non-Specified Professions Income and turnover do not exceed Not required to maintain books of
the threshold limit as specified accounts
above
Business Income and turnover do not exceed Not required to maintain books of
the threshold limit as specified accounts
above
Non-Specified Professions Income and turnover exceed the Such books of accounts which may
threshold limit as specified above enable the Assessing Officer to
Business Income and turnover exceed the Such books of accounts which may
threshold limit as specified above enable the Assessing Officer to
FAQ 31. Mr. A is maintaining books of accounts at more than one location. Whether the
address of all the locations is to be mentioned in the audit report?
Clause 11 of Form 3CD requires a list of books maintained and the address at which such books of
accounts are kept. If such books of accounts are kept at multiple locations, then the auditor is required
to mention the address of all the locations along with the details of books of accounts maintained at
each location. In the case of a company assessee, the auditor should verify whether Form AOC-5 has
been filed with the Registrar of Companies under the Companies Act to maintain books of accounts at a
place other than the registered office.
The auditor's duties regarding 'books of account maintained' is not limited to merely giving a list of
books of account against clause 11(b). He is required to examine the books of account maintained.
Based on such examination, he is required to state in Form No. 3CB whether books of account kept are
'proper books of account'.
FAQ 32. An assessee has changed the method of accounting from mercantile to cash
basis. What disclosure is required in Form 3CD?
Clause 13 of Form 3CD requires every assessee to report the method of accounting employed in the
previous year. Further, if there was a change in the method of accounting employed in the immediately
preceding previous year, then the same is to be reported. The assessee is also required to disclose the
effect of a change in the method of accounting on the profit and loss. If it is not possible to quantify the
effect of a change in the method of accounting, appropriate disclosure should be made under this
clause.
A change in accounting policy will not amount to a change in the method of accounting, and hence any
change in the accounting policies need not be mentioned under clause 13(b).
FAQ 33. Whether adoption of Ind AS for the first time could be considered a 'Change in
Method of Accounting' for disclosure in Form 3CD?
Method of Accounting refers to the basic rules and guidelines under which businesses keep their
financial records and prepare their financial statements. There are two main accounting methods used
for record-keeping - the Cash Basis and the Accrual Basis. In contrast, the Accounting Standards or Ind
AS pre-requisite the accrual basis of accounting. Accounting standards are authoritative for financial
reporting and are the primary source of generally accepted accounting principles (GAAP).
Method of Accounting should not be confused with GAAP. Method of Accounting can be either a cash
basis or accrual basis. The GAAP provides the principles and procedures for the calculation and
recognition of a financial transaction within the framework of the Accrual basis of accounting. When an
entity switches from Accounting Standards to Ind AS, it does not change its method of accounting.
Thus, the transition to Ind AS should not be treated as a change in the method of accounting.
FAQ 34. Whether GST registration no. of the assessee has to be furnished in Form 3CD if
the assessee is liable to pay tax under reverse charge?
The ICAI, vide Implementation Guide dated 22nd August, 2018, has clarified that even if liability to pay
GST is only under the reverse charge mechanism, the fact of being liable to GST needs to be answered in
the affirmative, with the clarification that such liability is only under the reverse charge mechanism.
FAQ 35. If an assessee has multiple GSTIN, which registration no. needs to be furnished
in Form 3CD?
In case the assessee has multiple GSTIN numbers (registered in different states), all the GSTIN
numbers allotted to him shall be mentioned in Form 3CD.
FAQ 36. What information is to be reported by the auditor under Clause 44 of Form 3CD?
Clause 44 of Form 3CD seeks details of the total expenditure incurred during the year. The break-up
needs to be given for the expenditure in respect of entities registered under GST and relating to entities
not registered under GST.
However, the CBDT11 has kept the reporting under clause 30C and clause 44 of the tax audit report in
abeyance until 31st March 2022. Therefore, the information is to be furnished in clause 30C and clause
44 for the reports filed on or after 31st March 2022.
FAQ 37. How to report a break-up of the total expenditure under clause 44?
Clause 44 requires the details in the following format:
(a) Total expenditure incurred during the year;

(b) Expenditure in respect of entities registered under GST:
■ Relating to goods or services exempt from GST;
■ Relating to entities falling under the composition scheme;
■ Relating to other registered entities;
■ Total payment to registered entities;
(c) Expenditure relating to entities not registered under GST.
The Guidance Note issued by ICAI clarifies the following aspects for reporting under this clause:
(a) Whether every head of expenditure is to be reported?
The guidance may be taken from the heading of the table, which starts with the words "Breakup of total
expenditure". Hence, the total expenditure, including purchases as per the above format, may be given.
It appears that head-wise/nature-wise expenditure details are not envisaged in this clause.
(b) Reporting of claims
Depreciation under Section 32, a deduction for bad debts under Section 36(1)(vii), etc., which are not
expenses, should not be reported under this clause.
(c) Transactions not considered as supply
Schedule III to the CGST Act, 2017 lists out activities or transactions that are neither treated as a supply
of goods nor a supply of services. Thus, expenditure incurred in respect of such activities need not be
reported under this clause.
For example, Para (1) of Schedule III covers "Services by an employee to the employer in the course of
or in relation to his employment". Thus, remuneration to employees need not be reported.
(d) Allowability of expense
Any expenditure incurred, wholly and exclusively, for the business or profession of the assessee
qualifies for the deduction under the Act. Registration or otherwise of the payee under the GST Act has
no relevance in considering the allowability of expenditure.
(e) Reporting of capital expenditure
In the table under clause 44, the language used is "expenditure in respect of." Since the word used is
'expenditure', it is necessary that the capital expenditure should also be reported in the format
prescribed. Separate reporting of capital expenditure will provide ease in reconciliation.
(f) Expenses of branch
This report may be prepared for an entity as a whole or a branch thereof, as it may be audited.
Accordingly, the information in these columns may have to be filled up, consolidating the expenditure
incurred under various GST registrations.
FAQ 38. How to report the Impermissible Avoidance Arrangement entered into by the
assessee?
Clause 30C of Form 3CD requires the Tax Auditor to report "Impermissible Avoidance Arrangements"
(IAA) entered into by the assessee during the previous year and to quantify the tax benefit arising in the
aggregate in the previous year to all the parties to such arrangement.
The tax auditor should examine whether the Principal Commissioner or the Commissioner or the
Approving Panel has, in any earlier previous year, declared any arrangement as IAA. If any
arrangement has been declared to be an IAA, the tax auditor should further examine whether any
transaction pertaining to or in connection with such declared IAA has taken place during the previous
year under the audit. If yes, the tax auditor is expected to report this fact in the audit report. The tax
auditor should also report tax benefits in the previous year arising from such transactions to all the
parties to the arrangement. If he is unable to ascertain the tax benefit arising in the previous year, in
aggregate, to all the parties to the arrangement, he should indicate the same in Form 3CA or Form 3CB,
as the case may be.
The auditor should examine if any reference has been made for declaring an arrangement as an
impermissible avoidance arrangement in any earlier previous year. If such references have been made,
the auditor should report the fact in Form 3CA or Form 3CB, as the case may be.
FAQ 39. How can the tax auditor report payments referred to in Section 43B if the same
is unpaid as on the date of submission of the tax audit report but paid before the due date
of filing of return of income?
Clause 26 of Form 3CD seek details of liability incurred in respect of any sum referred to in clause (a),
(b), (c), (d), (e), or (f) of section 43B in the previous year and was paid or not paid on or before the due
date for furnishing the Return of Income of the previous year.
Since the due date of filing of the tax audit report is one month before the due date of filing of return of
income, it is practically not possible for the auditor to report if any payment is made after the filing of
the tax audit report but before the due date of return of income.
To address this difficulty, the CBDT has inserted sub-rule (3) in Rule 6G to provide that the tax audit
report may be revised by the person by getting a revised report of audit from an accountant, duly signed
and verified by such accountant, and furnish it before the end of the relevant assessment year for which
the report pertains, if there is payment by such person after furnishing of the report which necessitates
a recalculation of disallowance under Section 40 or Section 43B.
FAQ 40. If shares of members of AOP are unknown during the previous year, is it
required to be reported in Form 3CD?
If shares of members are unknown during the previous year, the auditor needs to disclose this fact in
Clause 9(a) of Form 3CD.
FAQ 41. How does the auditor need to report the interest inadmissible under Section 23
of the MSMED Act, 2006?
Clause 22 of Form 3CD seeks the disclosure of the amount of interest inadmissible under section 23 of
the Micro, Small, and Medium Enterprises Development Act, 2006. The tax auditor needs to report the
amount of interest inadmissible under section 23 of the MSMED Act, 2006 irrespective of whether the
amount of such interest has been debited to the profit and loss account or not.
The auditor should verify that the auditee has disclosed the information as required under section 22 of
the MSMED Act, 2006 in the financial statements under audit. If no disclosure is made by the auditee
in the financial statements, the tax auditor should appropriately qualify his report in Form No. 3CB and
also report the fact of non-disclosure in clause 22 of Form No. 3CD.
FAQ 42. Is it mandatory to disclose the nature of all the businesses carried on by the
assessee and any change therein?
Clause 10 of Form 3CD mandates disclosure of the nature of every business or profession carried on by
an assessee during the previous year.
Any material change in the nature of business should be precisely disclosed. The change will include a
change from manufacturer to trader as well as a change in the principal line of business. Any addition to
or permanent discontinuance of a particular line of business may also amount to change requiring
reporting. However, temporary suspension of the business may not amount to change and, therefore,
need not be reported.
FAQ 43. Mr. A has opted for the presumptive scheme under Section 44AD in respect of
one of his businesses. Whether auditor is required to mention details of such business in
the audit report?
In case the profit and loss account of the assessee includes any profit declared under the presumptive
scheme (Section 44AD, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB), then it is mandatory to mention the
amount of such profit and the section under which the same is declared in Clause No. 12 of Form 3CD.
The tax auditor is not required to indicate if the amount of presumptive income has been correctly
computed under the relevant section relating to presumptive taxation. The reporting requirement is
satisfied if the amount as per profit and loss account is reported.
FAQ 44. How to ensure that the profit has been computed correctly if the profit & loss
account also includes the profit computed on a presumptive basis?
If the profit and loss account of the assessee also includes the presumptive income, the common
business expenditure has to be apportioned to arrive at the correct amount of profit credited to the
profit and loss account and assessable on a presumptive basis. The tax auditor, in such a situation,
should arrive at a fair and reasonable estimate of such expenditure on the basis of evidence in
possession of the assessee or by asking the assessee to prepare such estimate, which should be checked
by him.
It is also necessary to mention the basis of apportionment of common expenditure. However, if the tax
auditor is not satisfied with the reasonableness of such apportionment, he should indicate such fact
under this clause by a suitable note.
FAQ 45. How to compute the amount of increase or decrease in profit due to compliance
with ICDS-IV?
In Clause 13(e) of Form 3CD, the disclosure shall be made about the profits increased or decreased after
applying ICDS. The revised profits, after taking into consideration the ICDS IV, shall be calculated in
the following manner. The net result of the table shall be reported in the said clause:
Accounting Standards (AS) - Reconciliation
Particulars Amount
Profit before tax as per AS financials xxx
Add: Income taxable (if not credit to P&L account)
1. Dividend income xxx
2. Amount of revenue not recognised in the current year as assessee followed service completion xxx
method for his books of account
3. Interest on income-tax refund accrued in the earlier year but received in the current year* xxx
4. Interest on compensation or enhanced compensation taxable in accordance with Section 145A(1)* xxx
Less: Income not taxable (if already credited to P&L account)
1. Excess revenue recognised in the current year as assessee followed service completion (xxx)
method for his books of account (xxx)
2. Interest on income-tax refund accrued in the current year but received in the subsequent year* (xxx)
3. Interest on compensation or enhanced compensation included in taxable income on an accrual (xxx)
basis*
Net profit/ loss before tax as per ICDS xxx
Indian Accounting Standards (Ind AS) - Reconciliation
Particulars Amount
Profit before tax as per Ind AS financials xxx
Add: Income taxable (if not credit to P&L account)
1. Dividend income xxx
2. Amount of revenue not recognised in the current year as assessee followed revenue recognition xxx
principles as per Ind AS 115
3. Interest on income-tax refund accrued in the previous year but received in the current year* xxx
4. Difference in ICDS and Ind AS revenue due to time value of money xxx
5. Interest income as per this ICDS xxx
6. Discount on debt securities as per this ICDS xxx
7. Interest on compensation or enhanced compensation taxable in accordance with Section 145A(1)* xxx
Less: Income not taxable (if already credited to P&L account)
1. Excess revenue recognised in the current year as assessee followed revenue recognition (xxx)
principles as per Ind AS 115 (xxx)
2. Interest on income-tax refund accrued in the current year but received in the subsequent year* (xxx)
3. Interest amount when the payment is deferred for a significant period of time (generally 1 year or (xxx)
more), if any
4. Interest income recognised on the basis of the effective interest rate method (xxx)
5. Interest on compensation or enhanced compensation included in taxable income on an accrual (xxx)
basis*
Net profit/ loss before tax as per ICDS xxx
FAQ 46. Sub-clause (d) of Clause 13 requires the details in respect of the adjustment
required for complying with the provisions of ICDS. Whether such adjustments are
required to be entered separately for income taxable under the head "PGBP" and Income
taxable under the head "Other Sources"?
The tax auditor needs to enter a consolidated amount by which the profit has been increased or
decreased. Such increase or decrease is not required to be bifurcated between the different heads of
income.
FAQ 47. An assessee has applied for a refund of Special Additional Duty (SAD), but the
same was not credited to the profit & loss account. Whether the disclosure is required in
Form 3CD?
If a claim for a refund of SAD has been admitted as due and accepted during the relevant financial year,
it shall be reported under Clause 16. If the claim has been lodged during the previous year but has been
admitted as due after the relevant previous year, it need not be reported here. Where such amounts
have not been credited in the profit and loss account but netted against the relevant
expenditure/income heads, such a fact should be brought out.
FAQ 48. What should be reported in item (d) of clause 16 "any other item of income" not
credited to the profit and loss account?
Clause 16 of the tax audit report requires reporting of the amount not credited to the profit and loss
account.
The disclosure in item (d) of clause 16 is titled "any other item of income". Whether certain incomes
taxable under any other head need not be reported in this column?
One view is that income from house property or other sources (like bank interest, dividends, etc.)
should not be reported in clause 16(d). Thus, no addition or adjustment shall be made by the CPC while
processing the return under Section 143(1).
The other view is that such other income should be reported. The arguments in favour of such a
conclusion are that Section 44AB starts with the expression "every person" carrying on business or
profession shall get his accounts of such previous year audited. The audit under Section 44AB is not
only for the books of account relating to business or profession but for the taxpayer. Thus, income
chargeable to tax under the head house property, capital gains, and other sources are also disclosed in
clause 16(d).
If the second view is followed, one may receive the tax demand as a result of adding the amount
disclosed in 16(d) to business / professional income without taking note of the fact that those incomes
are taxable under other heads.
Disclosure in clause 16 by the tax auditor by taking the view that the tax audit report is meant for the
taxpayer and not explicitly limited to business or profession needs to be appreciated in the overall
context of tax compliance. Such disclosure provides wholesome information to the department about
the taxpayer. However, when such information is captured in the 'Other Information Schedule' of ITR,
the CPC may compare it with incomes offered under other heads. If they are equivalent to or more than
the amount disclosed in clause 16 of Form 3CD, no adjustment may be made under Section 143(1).
However, clarity is needed from Dept. in this regard.
FAQ 49. Whether an auditor has to quantify whether the payment to a related person is
unreasonable or excessive under Clause 23?
No, the auditor is not required to quantify whether the payment is unreasonable or excessive. Only the
Assessing Officer can make the disallowance if, in his opinion, the expenditure is unreasonable.
FAQ 50. In case of purchase from the related party, which of the following amount is
required to report under Clause 23?
(a) Purchase debited to P&L (Gross purchase, i.e., before deducting the
purchase return)
(b) Purchase debited to P&L (net purchase, i.e., after deducting the
purchase return)
(c) Actual amount paid to creditors during the current year
Section 40(A)(2) provides that expenditure for which payment has been or is to be made to certain
specified persons listed in the section may be disallowed if, in the opinion of the Assessing Officer, such
expenditure is excessive or unreasonable. The section enjoins the Assessing Officer's power to fix the
quantum of disallowance.
It may be advisable for the tax auditor to clarify that what has been reported are the actual payments
made to specified persons during the previous year. These are not necessarily the amounts claimed
in/debited to the profit and loss account.
The tax auditor is only required to give particulars of payments to persons specified under section
40A(2)(b) under this clause. He is not required to give his opinion on the unreasonably/excessiveness
of the payments, and that is the Assessing Officer's prerogative.
FAQ 51. Whether reporting under clause 23 applies to capital expenditure incurred by
the assessee?
As the clause requires an auditor to report all the payments made to the specified persons, the
payments made for capital purchases should also be considered for reporting under this clause.
FAQ 52. Under clause 34(c), whether the amount of interest that was payable on 31st
March and paid during the current year to be reported? Or taxpayer is required to report
all interest even if paid in the previous year itself
Under this clause, the auditor is required to furnish detailed information in case the assessee is liable to
pay interest under section 201(1A) or section 206C(7) of the Act. The reporting in clause 34(c) should be
in consonance with the reporting under clause 34(a) where the details of non-deduction are required to
be reported.
Where the assessee is liable to pay interest u/s 201(1A) or 206C(7), the tax auditor should verify such
amount from the books of account as of 31st March of the relevant previous year and also from PART G
of the statement generated by the Department in Form No. 26AS. In case the assessee had disputed the
levy or calculation of interest under TRACES, in Form No. 26AS, the tax auditor may re-calculate the
amount of interest under section 201(1A) or section 206C(7) up to the audit report date for reporting
under this clause and mention the fact in his observations paragraph provided in Form No. 3CA or
Form No. 3CB, as the case may be.
FAQ 53. As Section 43B specifically disallows the interest expense which is converted
into a loan, whether such disallowance shall be permanent in nature?
Circular No. 7/2006 dated 17th July 2006 clarifies that the unpaid interest, whenever actually paid to
the bank or financial institution, will be in the nature of revenue expenditure deserving deduction in the
computation of income. Therefore, the converted interest, by whatever name called, in the wake of its
conversion into a loan or borrowing or advance, will be eligible for deduction in the computation of
income of the previous year in which the converted interest is 'actually paid'.
In other words, the nomenclature of the sum of converted interest will make no difference as the
payment of converted interest will not represent the repayment of the principal. The circular clarifies
that the fundamental principle remains that once an amount has been determined as interest payable to
the banks or financial institutions, any subsequent change of nomenclature of interest will not affect its
allowability, and deduction in terms of section 43B will have to be allowed on its actual payment. The
Assessing Officer, however, can ask for a certificate from the assessee to be obtained from the lender
bank or financial institution, etc., as evidence of 'actual payment' of interest to banks or financial
institutions.
FAQ 54. Whether sum payable to Indian Railways for advertisement at railway stations
would be disallowed under Section 43B?
If the payment is being made by an advertising agency to the railways for putting up hoardings or
display panels on railway premises, such payment will amount to the payment for the use of railway
assets, as the payment is for the use of space on the premises. However, where an advertiser is making
payment to the railways for the display of advertisements on hoardings or displays on railway premises,
such a payment is in the nature of payment for the services of advertisement, and not for the use of
railway assets.
Any sum payable to Indian Railways for the use of railways assets shall be allowed on a payment basis.
Any sum payable to Indian Railways for its services shall be allowed as per the method of accounting
regularly employed by the assessee.
FAQ 55. Whether details regarding GST have to be reported in Clause 27(a) as a clause in
Form 3CD requires details of CENVAT but in schema requires for CENVAT/ITC?
Clause 27(a) applies to all assesses registered under GST/Central Excise. Though no reference of Input
Tax Credit (ITC) is notified in Form 3CD, the same is maintained in e-filing utility format. Hence, all
assessees registered under GST/Central Excise should provide the relevant details in Form 3CD.
FAQ 56. Whether details to be provided in Clause 27(a) should match with the books of
accounts?
While providing the detail under clause 27(a) of 3CD, an assessee should ensure that details are
reconciled with the books of account vis-à-vis details available on the GST portal. The assessee shall
maintain a proper reconciliation with respect to the same. However, an assessee may adopt either book
of account or GST portal to provide the information under this clause, provided the same basis is
adopted consistently. The tax auditor should verify that there is a proper reconciliation between the
balance of CENVAT/Input credit in the accounts and relevant excise and GST records. The tax auditor
should report the amount of CENVAT/Input availed and utilised under this sub-clause.
FAQ 57. If the statutory auditor does not consider an item as a prior period expense,
whereas the tax auditor feels that such item should be considered as a prior period,
should that expense be disclosed in Clause 27(b) of Form 3CD?
It may be noted that there is a difference between the expenditure of any earlier year debited to the
profit and loss account and the expenditure relating to an earlier year, which has crystallised during the
relevant year. An expense, though related to previous periods, which has been determined in the
current period, would not be considered a prior period item.
In such cases, though the expenditure may relate to the earlier year, it can be considered as arising
during the year on the basis that the liability materialised or crystallised during the year, and such cases
will not be reported under this clause.
In case of any conflict in the opinion of the statutory auditor and tax auditor, the opinion of the tax
auditor shall prevail, and the information thereof shall be reported in Form 3CD.
FAQ 58. There is a difference in opinion between the tax auditor and the client with
respect to the applicability of a TDS provision on a particular payment. How to report
such differences in the tax audit report?
If the tax auditor and client have a difference of opinion with respect to the applicability of the
TDS/TCS provision, such concern shall be reported in clause (3) of Form 3CA or clause (5) of Form
3CB, as the case may be.
FAQ 59. Mr. A, a sole proprietor, agreed to transfer his personal property to Mr. X and
received some non-refundable advance against such a deal. The sale could not
materialise as Mr. X could not pay the whole amount, and the advance money was
forfeited by Mr. A. What are the disclosure requirements?
Section 56(2)(ix) of the Income-tax Act provides for taxability of any sum received as an advance in the
course of negotiations for the transfer of a capital asset, and such sum was forfeited due to non-transfer
of such capital asset. A new Clause 29A to Form 3CD has been inserted to report any advance received
from the buyer but forfeited due to the non-materialisation of a deal to the sale of the capital asset.
The auditor is not required to report any such forfeited amount in respect of a personal capital asset or
stock-in-trade. Any advances received and forfeited towards the sale of stock-in-trade would be taxable
under section 28(i), and would not be required to be reported since the amount would be credited to the
profit & loss account.
The requirement of reporting arises only on forfeiture of advance. If an advance has been received and
has been outstanding for a considerable time, there is no requirement to report such amount unless and
until it is forfeited by an act of the assessee.
FAQ 60. Should advance received from a person for the sale of goods also be disclosed
under Clause 31?
Loans or deposits are generally squared off by repayment of the sum to the lender. While as in the case
of advance for the sale of goods, the party's ledger is squared off by the delivery of goods or services.
Thus, an advance received against the agreement of sale of goods could not be deemed a loan or deposit.
Accordingly, details of advances shall not be reported in Clause 31. Further, the ICAI, in the guidance
note, has clarified that the advance received against the agreement of sale of goods is not a loan or
deposit.
FAQ 61. ABC Ltd. has rendered services to its Associated Enterprise resulting in a net
profit of 15% on cost. Transfer Pricing Officer (TPO) calculated the ALP of this
transaction at 20% of the cost and accordingly made an adjustment. Is it required to be
reported in Form 3CD?
As per Clause 30A of Form 3CD, if any primary adjustment to the transfer price has been made as per
Section 92CE(1), then the following details need to be given in Clause 30A of the form.
(a) Clause of Section 92CE(1) in which primary adjustment is made

(b) Amount of primary adjustment
(c) Whether the excess money available with the associated enterprise required to be
repatriated to India as per the provisions of Section 92CE(2)?
(d) If yes, whether the excess money has been repatriated within the prescribed time.
(e) If no, the amount of imputed interest income on such excess money has not been
repatriated within the prescribed time.
FAQ 62. How to calculate the interest on excess money that need to be repatriated after a
primary adjustment?
Rule 10CB provides the rate of interest at which interest has to be calculated on excess money or part
thereof which is not repatriated within the time limit. Where the international transaction is
denominated in Indian rupees, the rate of interest will be the one-year marginal cost of fund lending
rate of the State Bank of India as of 1st April of the relevant previous year, plus 325 basis points (plus
3.25%). Where the international transaction is denominated in foreign currency, the rate of interest
shall be the six-month London Interbank Offered Rate (LIBOR) as of 30th September of the relevant
previous year plus 300 basis points (plus 3%).
It is possible that the amount of imputed interest income on the excess money not repatriated to India
may relate to more than one year. Having regard to Rule 10CB, the interest liability extends till the date
of repatriation. Accordingly, for the relevant year under audit, such liability in respect of imputed
interest may extend not only to the primary adjustment but may also relate to the primary adjustment
made in the earlier years.
FAQ 63. My client has borrowed money from its foreign holding company, and the
interest paid on such a loan was Rs. 1.05 crore during the previous year. Whether this
transaction is reportable in Form 3CD?
As per Section 94B, if an Indian company or PE of a foreign company pays interest in excess of Rs. 1
crore to the associated enterprise, the deduction for interest shall be restricted to lower of the following:
(a) Total interest paid or payable in excess of 30% of earnings before interest, taxes,
depreciation, and amortisation ('EBITDA') of the borrower in the previous year; or
(b) Interest paid or payable to AEs for that previous year.
The excess interest, which is disallowed, can be carried forward for 8 assessment years following the
year of disallowance, to be allowed as a deduction against profits and gains of any business in the
subsequent years, to the extent of maximum allowable interest expenditure under this provision.
A new Clause 30B has been inserted in Form 3CD, which requires details of such interest payment with
the following disclosures:
(a) Amount of expenditure by way of interest or of similar nature incurred.

(b) EBITDA during the previous year.
(c) Amount of expenditure by way of interest or of similar nature as per (a) above,
which exceeds 30% of EBITDA as per (b) above.
(d) Details of interest expenditure brought forward as per Section 94B(4).
(e) Details of interest expenditure carried forward as per Section 94B(4)
This clause shall not be applicable in the case of a company that is engaged in the business of banking
or insurance.
FAQ 64. Whether the figure of EBITDA shall be as per books of account or as per
provisions of Income-tax?
While computing the EBITDA, the figures as per the final audited stand-alone accounts of the company
should be considered, not the figures adjusted for the income tax computation after various allowances
and disallowances.
FAQ 65. How the details of loans accepted and repayment thereof shall be reported in
Clause 31 of Form 3CD?
Nature of Transaction during the year Mode To be reported

in
Loan or Deposit Accepted A/c Payee cheque Clause 31(a)

Loan or Deposit Accepted Others Clause 31(a)
Receipt of advance for transfer of Immovable Property A/c Payee cheque Clause 31(b)
Receipt of advance for transfer of Immovable Property Others Clause 31(b)
Other Receipt of Rs. 2 lakhs or more Cheque or draft (not being A/c Clause 31(ba)
Payee)
Other Receipt of Rs. 2 lakhs or more Other Mode (not being Clause 31(bb)
Cheque or Draft)
Payment in excess of Rs. 2 lakhs Cheque or draft (not being A/c Clause 31(bd)
Payee)
Payment in excess of Rs. 2 lakhs Other Mode (not being Clause 31(bc)
Cheque or Draft)
Repayment of Loan or Deposit or advance for transfer of A/c Payee cheque Clause 31(c)
Immovable Property
Repayment of Loan or Deposit or advance for transfer of Others Clause 31(c)
Immovable Property
Repayment of loan or deposit or advance for transfer of Any Clause 31(d)
Immovable Property (originally accepted other than through
cheque)
Repayment of loan or deposit or advance for transfer of Any Clause 31(e)
Immovable Property (originally accepted through cheque or
draft not being A/c payee cheque/draft)
FAQ 66. My client has furnished the statement of tax deducted or tax collected within the
prescribed time limit. Do I have to report the details of such returns in form 3CD?
Up to Assessment Year 2017-18, an assessee is required to report details regarding furnishing of

statement of tax deducted or tax collected under clause 34(b) if such statements weren't submitted
within the prescribed time limits. However, w.e.f. the assessment year 2018-19, Form 3CD requires
such details even if the assessee has submitted the statements within prescribed time limits.
Further, if the assessee failed to report all transactions in statements of TDS/TCS, then unreported
transactions have to be disclosed in clause 34(b) of Form 3CD.
FAQ 67. Should capital expenditure be reduced from the actual cost of a capital asset if
tax was not deducted from such expenditure?
As per section 40(a)(ia), 30% of an expense is disallowed if tax is not deducted or after deduction is not
paid to the government. Whether this provision shall be applicable only in the case of revenue
expenditure or in respect of capital expenditure as well has been a matter of dispute between taxpayer
and revenue. The revenue always argues for reducing the actual cost of a fixed asset if the tax has not
been deducted for an expense that is capitalised as per provisions of section 43(1). In the cases of CIT v.
Plasmac Machine Mfg. Co. Ltd. [1993] 69 Taxman 395/201 ITR 650 (Bom.) and Sumilon Industries
Ltd. v. ITO [2010] 3 taxmann.com 187 (Ahd.-Trib.), it was held that disallowance under this section
could be made only from an expense that is claimed in Profit and Loss Account. Since, in the case of
capital expenditure, no deduction is claimed under the P/L account, there should not be any
disallowance under section 40(a)(ia) in respect of such payment.
FAQ 68. Should quantitative details of each and every stock be mentioned in clause 35?
Clause 35 requires quantitative details of 'principal items' of raw materials and finished goods.
Therefore, information about petty items need not be given. Normally, items that constitute more than
10% of the aggregate value of purchases, consumption, or turnover may be classified as principal items.
FAQ 69. In case of a manufacturing concern, the auditor failed to ascertain the yield of
finished goods because of different measurement units of raw material and the finished
product. How to report this in Form 3CD?
If the assessee is engaged in the manufacture of goods, the yield and shortage cannot be ascertained if
the input of raw materials and the output of finished goods are recorded in different units of
measurement.
If the end product is a standard item and can be converted back and related to the input of the raw
material in the same unit of measurement, it should be done to ascertain the shortage, yield, etc. If it is
not possible, the tax auditor should state the fact under this clause.
FAQ 70. How to furnish the ratios in Clause 40 of Form 3CD?
Clause 40 seeks the following details ratios for the previous year and the preceding previous year.
Sl.No. Particulars Previous Year Preceding Previous Year

1. Total turnover of the assessee
2. Gross profit/turnover
3. Net profit/turnover
4. Stock-in-trade/turnover
5. Material consumed/finished goods produced
The ratios have to be given for the business as a whole and not product-wise. The relevant previous
year's figures are to be taken from the last previous year's audit report. If the previous year is not
subject to audit, nothing should be mentioned in the relevant column.
The tax auditor is not to sit in judgment over whether ratios calculated under clause 40 are fair for tax
assessment purposes. He should simply comply with clause 40 to calculate and report the ratios with
calculations.
FAQ 71. In the case of the first Ind AS financial statements, whether the details regarding
turnover, gross profit, ratios, etc., for the previous year and preceding previous year
shall be as per Ind AS financial statements?
As per Ind AS 101 - First Time Adoption of Indian Accounting Standards, in case of transition from AS
to Ind AS, the opening balances and the comparative figures have to be calculated and presented as per
Ind AS.
The Income-tax Act does not provide any mechanism for calculation of gross profit, turnover, or ratios
for disclosure in Form 3CD. Thus, such disclosures have to be made as per the financial statements
prepared in accordance with AS or Ind AS. As the entity has to present the comparative figures in Ind
AS financial statements, the same information can be used to disclose the desired information in Form
3CD.
FAQ 72. In the case of Ind AS financial statements, if liability increases due to a change in
actuarial assumptions taken to calculate the provision of gratuity, which is debited to
OCI, whether the entity can claim the deduction for such additional liability?
The courts have held that if the provision for gratuity is computed scientifically (i.e., actuarial
valuation), the deduction thereof shall not be denied. If any liability increases due to a change in the
actuarial assumptions, the resultant expense is recognised in OCI by virtue of Ind AS 19 - Employee
Benefits. Thus, if the provision for gratuity increases due to changes in the assumptions, such as
discount rate, mortality rate, etc., the additional expenses recognised in OCI should be allowed as a
deduction while computing the taxable business income. If an increase in provision for gratuity is
attributable to such change in actuarial assumption, it shall not be disclosed as disallowable under
Clause 21(e).
FAQ 73. Should the deduction of interest charged to Statement of Profit & Loss due to the
"effective interest rate method" of Ind AS be allowed under the Income-tax Act?
In view of Ind AS, the processing fees paid to the banks or financial institutions in respect of borrowings
have to be amortised over the tenure of the loan. In other words, the amount of borrowing cost
recognised during the year shall be the sum of actual interest paid or payable to the bank and the
amortised amount of processing fees.
The deduction for such borrowing cost under the Income-tax Act shall be subject to Section 43B. The
deduction for interest and processing fees shall be allowed on a payment basis. Thus, if the processing
fee has been paid to the bank, the deduction for the entire fee shall be allowed in the year of payment
itself. Irrespective of the amount of borrowing cost recognised in the books of account, the Income-tax
Act shall allow a deduction for the entire amount of interest or process fees paid to the bank during the
year. The disclosure shall be made in Clause 26.
FAQ 74. A demand was raised with respect to Custom duties on my client, and the same
was adjusted against the refund due in his name. So no amount was paid by him to the
department. As an auditor, do I need to disclose the same in form 3CD?
Yes, an auditor is required to report the details of demand raised or refund issued to the assessee during
the previous year, irrespective of the fact that it was adjusted against any pending demand or refund.
Details are to be shown under Clause 41 of Form 3CD.
FAQ 75. Should any consideration for the issue of shares that exceeds the fair market
value of the shares received by a start-up be reported in clause 29?
Reporting obligation under Clause 29 is triggered if a closely held company issues unquoted shares at a
premium. In such case, the excess of the premium over the fair market value of the shares shall be
taxable as income from other sources in the hands of the company.
The DPIIT's recognised start-ups are exempted from the applicability of Section 56(2)(viib) subject to
the satisfaction of various conditions prescribed under the notification issued by the DPIIT12. Therefore,
Clause 29 shall apply only to closely held companies except DPIIT recognised start-ups that satisfy the
condition for exemption. If the private limited company in question is a DPIIT-recognised start-up
eligible for exemption under section 56(2)(viib), the e-mail received from CBDT regarding eligibility for
exemption must be verified by the tax auditor, and suitable remarks should be made regarding the
applicability of the exemption and the non-applicability of Clause 29.
Section 56(2)(viib) and Notification issued by the DPIIT12 prescribe various conditions for a start-up to
claim exemption from payment of tax under this provision. In case of failure to comply with these
conditions, the consideration received from the issue of shares, as exceeding the fair market value of
such shares, shall be deemed to be the income of the company chargeable to tax for the previous year in
which such failure takes place. When the exemption is withdrawn, it shall be deemed that the company
has underreported the income in consequence of the misreporting, and consequently, a penalty of an
amount equal to 200% of tax payable on the underreported income shall be levied as per Section
270A13.
FAQ 76. Whether a change in shareholding of a start-up company is to be reported in

Clause 32(b) of Form 3CD?
Clause 32(b) applies only to closely-held companies (companies in which the public is not substantially
interested). It seeks information on the change in shareholding of the company in the previous year due
to which the losses incurred before the previous year cannot be allowed to be carried forward in terms
of section 79.
Section 79 provides that the losses incurred by a closely held company in any year before the previous
year shall not be carried forward and set off against the income of the previous year unless the shares of
the company carrying at least 51% of the voting power are beneficially held by the same persons on the
following two dates:
(a) On the last day of the previous year in which loss was incurred;
(b) On the last day of the previous year in which, such brought forward loss has to be set off.
The losses incurred by an eligible start-up shall be allowed to be carried forward and set off against the
income of the previous year on the satisfaction of any of the two conditions specified below:
Condition 1: Continued 51% shareholding
In the year of set-off of losses, at least 51% of voting power is beneficially held by the same persons who
held them as on the last day of the year in which loss was incurred; or
Condition 2: Continued 100% shareholders with the same voting rights
100% of shareholders, on the last day of the previous year in which loss was incurred, should continue
to hold the same shares on the last day of the previous year in which loss is to be set off. Further, such
losses should have been incurred for 7 years beginning from the year of incorporation of the company.
Hence, the tax auditor should check whether a change in shareholding as envisaged by section 79 of the
Act has taken place, and the composition of shareholding as of the last day of the current previous year
should be compared with the composition of shareholding as at the last day of each previous year in
which loss was incurred. The comparison should be made by reference to the Register of Members. The
carry-forward of loss incurred in respect of different previous years should be determined the previous
year-wise.
Thank You
CA Samit Jena

Tax Audit Under Section 44AB For AY 2022-23

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Tax Audit Under Section 44AB For AY 2022-23

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[2022] 142 taxmann.

FAQ 1. What is a tax audit?

FAQ 2. In which form the tax audit report has to be obtained?

Category of Taxpayer Form for Audit Annexure to Audit

FAQ 3. Who is required to get books of accounts audited?

Nature of Business or Category of Taxpayer When is the audit mandatory?

Particulars Mode of transaction

Computation of percentage of cash receipts & payments:

Particulars Total (A) Cash (B) % in cash (B/A*100)

Receipts 640 40 6.25%

Let's understand this with the help of the table below:

Situation* Turnover Whether liable for a tax audit?

Transaction Buy Value Sell Value Realised P&L Computation of Turnover

Case Gross Profit Whether tax audit Reason

Computation of Gross receipts or Turnover

(a) Sales turnover

Following receipts shall be included in the gross receipts:

FAQ 12. How to calculate the turnover of the commission agent?

Turnover of a commission agent or a person selling goods on a consignment basis is determined

FAQ 13. How to calculate the turnover of a share broker?

FAQ 14. How to calculate the turnover in case of a speculative transaction?

Securities Amount of gain or (loss)

FAQ 15. How to calculate the turnover in the case of derivatives?

(a) The total of favourable and unfavourable differences is taken as turnover.

Security Name Profit/(Loss)

Due Date & Process to file Tax Audit Report

(a) 0.5% of the total sale, turnover, or gross receipts; or

Disclosure & Reporting in Form 3CD

FAQ 28. Who has to follow ICDS?

Exception 1: Exemption to Individual or HUF not liable for tax audit

Exception 2: Exemption for MAT Computation

Nature of Business or Threshold Limits Books of Accounts to be

4. Carbon copies of bills and carbon

5. Original bills issued to the

6. Signed vouchers, if bills and

3. Inventory under broad heads of

Specified Professions In every case, irrespective of gross

Clause 44 requires the details in the following format:

(a) Total expenditure incurred during the year;

(a) Whether every head of expenditure is to be reported?

(b) Reporting of claims

(c) Transactions not considered as supply

(d) Allowability of expense

(e) Reporting of capital expenditure

(f) Expenses of branch

Accounting Standards (AS) - Reconciliation

(a) Clause of Section 92CE(1) in which primary adjustment is made

(a) Amount of expenditure by way of interest or of similar nature incurred.

Nature of Transaction during the year Mode To be reported

Loan or Deposit Accepted A/c Payee cheque Clause 31(a)

Up to Assessment Year 2017-18, an assessee is required to report details regarding furnishing of

FAQ 70. How to furnish the ratios in Clause 40 of Form 3CD?

Sl.No. Particulars Previous Year Preceding Previous Year

FAQ 76. Whether a change in shareholding of a start-up company is to be reported in

Condition 1: Continued 51% shareholding

Condition 2: Continued 100% shareholders with the same voting rights

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