Central Board of Direct Taxes (CBDT) vide its Income Tax Notification No. 23/2025, dated 28th March 2025 has introduced amendments to Form 3CD under the Income-tax Rules, 1962. These updates will impact all tax audit reports signed on or after 1st April 2025, relevant for Assessment Year (AY) 2025-26.
Having worked with tax audit clients across sectors, I view these changes as more than procedural updates—they reflect a push towards greater accountability, enhanced audit trails, and increased emphasis on MSME and cross-border compliance. The audit environment is changing, and accordingly our approach should be changed.
Clause-wise analysis of Amendments introduced in Form 3CD
| Clause | Particulars | Nature of Amendment | Practical Insight from Practice |
| Clause 12 | Presumptive Income under Sec. 44BBC | Newly inserted clause for reporting by broadcasting and production entities under presumptive taxation. | Practitioners must identify qualifying clients early. |
| Clause 19 | Chapter VI-A Deductions | Sections 80-IB, 80-IC, and 80-ID omitted. | Omitted as these deductions are now not relevant |
| Clause 21 | Disallowance under Section 43B | New row for “Settlement Expenses” added. | Relevant where client agreements involve dispute resolution or negotiated settlements. |
| Clause 22 | MSMED Act Interest Payable | This clause Requires reporting of interest payable to MSMEs, irrespective of their payment status. | This clause requires classification of vendor and proper ageing analysis. |
| Clause 23 | Buy-back of Shares (Sec. 115QA) | This clause requires detail of amount received and acquisition cost of shares. | Auditors must verify supporting documentation and method of valuation. |
| Clause 26 | TDS on Payments to Non-Residents | Expanded to include detailed information on TDS compliance. | Essential for clients with foreign remittances—robust documentation is critical. |
| Clauses 28 & 29 | Reporting under Sec. 56(2)(viia)/(viib) | Omitted due to legislative changes. | Omitted |
| Clause 31 | Reporting of Loans and Deposits | Mandatory classification into 12 categories. | Better tracking for tax authorities; CAs must reconcile entries with books and confirm categorisation. |
| Clause 36B (Inserted) | Buy-back Transactions | New clause introduced to give buy-back activity under Sec. 115QA in form 3CD. | While similar to Clause 23, this may facilitate data analytics and assessment. |
Effective Date
All amendments shall be applicable to tax audit reports signed on or after April 1, 2025, hence applicable for AY 2025–26 onwards. Firms must prepare by revising audit checklists, client data templates, and internal review mechanisms.
Final Thoughts
These changes are far from cosmetic. As a CA (Tax Auditor), I see this as a strategic shift that brings transparency and accountability to the forefront. Particularly for clients dealing with MSMEs or engaging in international transactions, the impact will be immediate and measurable.
Practitioners should start sensitising their teams and clients alike. Updated templates, classification standards, and stronger documentation will be key for seamless audit completion under the new format. Staying proactive now will help avoid last-minute complications during the audit season.
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