Analysis of the amendments made in Form 3CD by Notification No. 33/2018-Income Tax dated 20 July 2018 w.e.f. 20th August 2018. As effective date of amended Tax Audit Report From 3CD is 20th August 2018. Hence, it appears that Tax Audit Reports in From 3CD furnished prior to 20 August 2018 need not include enhanced reporting requirements.
Key amendments in Tax Audit Reports in From 3CD includes Gift transactions, secondary adjustment under transfer pricing provisions, disallowance of interest deduction under the new interest deduction limitation rule as per BEPS Action 4, General Anti-avoidance Rule (GAAR), deemed dividend taxation under section 2(22)(e), Specified Financial Transactions (SFT), compliance under Foreign Account Tax Compliance Act (FATCA), compliance of provisions of Country-by- Country Reporting (CbCr), details relating to Goods and Service Tax (GST).
|S.N||Entry No in 3CD||Section or provision affected by the amendment||Details of amendments made.|
|1||4||Payment of Indirect Taxes||Under the description of payment of indirect taxes, the taxes to be paid under GST Act with GSTN No. has also been included|
|2||19||Amounts admissible under sections 32AD||A new section 32AD has been included. This section provides for a deduction of 15% of the cost of new assets in respect of new undertakings to be set up in the backward areas in Andhra Pradesh, Telangana, Bihar and West Bengal for a period of 5 years.|
|3||24||Deemed Profits or Gains u/s 32AD||As per clause 19 above, the deduction of 15% will be treated as income from business if the new assets acquired pursuant to section 32AD are sold within a period of 5 years. The amount of income will be equal to the amount of deduction allowed in earlier year. Any excess over the amount of deduction will be taxed as short term capital gain.|
|4||26||Payment u/s 43B||A new clause (g) has been inserted to provide that the deduction for any amount payable by the assessee to the Indian Railways for the use of railway assets shall also be allowed only on the actual payment basis.|
|5||29A||Other Income u/s 56||A new clause (ix) has been inserted to provide that if any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset, is forfeited and the negotiations do not result in transfer of such capital asset then the same shall be reported.|
|6||30A||Primary Adjustments to the transfer price u/s 92 CE(1)||This section provides that when, in case of international transactions transfer price is determined in accordance with the arm’s length principle, which results in an increase in the total income or reduction in the loss, as the case may be, then the excess money which is available with its associated enterprise, if not repatriated to India within 90 days from the relevant date, shall be deemed to be an advance made by the assessee to such associated enterprise and the interest on such advance, shall be computed as under:
1) at the one year marginal cost of fund lending rate of State Bank of India as on 1st of April of the relevant previous year plus three hundred twenty five basis points in the cases where the international transaction is denominated in Indian rupee; or
2) at six month London Interbank Offered Rate as on 30th September of the relevant previous year plus three hundred basis points in the cases where the international transaction is denominated in foreign currency.
The new reporting requirement provides that the amount of primary adjustments, repatriation within 90 days and the amount of imputed interest excess money shall be calculated and reported.
|7||31||Section 269ST: Mode of undertaking transactions.||This section was inserted by the Finance Act 2017 w.e.f. 1st April 2017. It provides that No person shall receive an amount of two lakh rupees or more-
(a) in aggregate from a person in a day; or
(b) in respect of a single transaction; or
(c) in respect of transactions relating to one event or occasion from a person,
otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account.
Clause (ba) provides for reporting particulars of each receipt in an amount exceeding Rs. 2 Lakhs, where such receipt is otherwise than by a cheque or bank draft or use of electronic clearing system through a bank account:-.
Clause (bb) provides for reporting particulars of each receipt in an amount exceeding Rs. 2 Lakhs, received by a cheque or bank draft, not being an account payee cheque or an account payee bank draft, during the previous year:
Clause (bc) provides for reporting the particulars of each payment made in an amount exceeding Rs. 2 Lakhs or more otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account.
Clause (bd) provides for reporting the particulars of each payment in an amount exceeding Rs. 2 Lakhs, made by a cheque or bank draft, not being an account payee cheque or an account payee bank draft, during the previous year.
Clause (c)(v) provides for reporting the particulars relating to repayment of loans or deposits exceeding Rs. 20000/- where the repayment has not been made by Account Payee Cheque or Account Payee Bank Draft or by use of electronic clearing system through a bank account.
Clause (d)(ii) provides for reporting the particulars of each repayment exceeding Rs. 20000, of loan or deposit or any specified advance received otherwise than by a cheque or bank draft or use of electronic clearing system through a bank account during the previous year.
Clause (e)(ii) provides for reporting each repayment exceeding Rs. 20000, of loan or deposit or any specified advance received by a cheque or a bank draft which is not an account payee cheque or account payee bank draft during the previous year..
Note: In the above clauses the phrase “ Exceeding Rs……………” has been used whereas in section 269ST the phrase “an amount of two lakh rupees or more” is used.
Similarly in sec 269T also phrase “ Exceeding Rs……………” has been used whereas in section 269T the phrase “Twenty thousand rupees or more” is used.
Therefore the reporting requirement will come when the amount of Rs. 2 Lakhs or more or Rs. 20000/- or more respectively are reached. The phrase “exceeding Rs…………………….” signifies that the amount is Rs. 2.01 Lakhs or more etc.
|8||34||Clause (b) Statement of deduction of tax||At present the reporting requirement in respect of TDS is only about deduction and collection of TDS.
The amendment now requires the assessee to report whether the assessee is required to furnish the statement of tax deducted or tax collected. If yes, then the following should also be reported:
1) Due date of furnishing
2) Date of furnishing, if furnished
3) Whether the statement contains information about all details/transactions which are required to be reported. If not then list of details/transactions which are not reported.;
|9||36A||Deemed Dividend u/s 2(22)(e)||This amendment provides for reporting any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise)|
|10||42(a) New insertion||Statement in Form No.61 or Form No. 61A or Form No. 61B||Section 285BA of the Income Tax Act, 1961 requires specified reporting persons to furnish statement of financial transaction.
(1)Form no. 61 requires the specified person who has received any declaration in Form No. 60 for the transactions specified in Annexure-A on or after 1st day of January, 2016 to furnish a statement in Form No. 61 electronically containing particulars of such declarations. Such Persons should retain Form No. 60 for a period of 6 years from the end of the financial year in which the transaction was undertaken:
(2)Form no. 61A requires the specified person to file a statement of financial transactions as per Annexure-B. Among other entries in the Annexure-B, the entry no. 11 provides for reporting by any person who is liable for audit under section 44AB of the Act, of Receipt of cash payment, by any person, of goods or services of any nature where the Receipt of cash payment is of Rs. 2 lakhs or more per transaction.
(3)Form no 61B provides for reporting, by a prescribed reporting financial institution, of all reportable account required to be furnished under clause (k) of sub-section (1) of section 285BA in respect of each account which has been identified, pursuant to due diligence procedure specified in rule 114H, as a reportable account. The due date for furnishing this statement is, in every calendar year, the 31st day of May following that year. A NIL statement is also required to be filed.
|11||43(a) new||Report u/s 286(2) of International Group||This amendment provides that every parent entity or the alternate reporting entity, resident in India, shall, for every reporting accounting year, in respect of the international group of which it is a constituent, furnish a report, to the prescribed authority within a period of twelve months from the end of the said reporting accounting year, in the form and manner as may be prescribed.|
|12||44 new||Break-up of total expenditure of entities registered or not registered under the GST:||This amendment provides for reporting of Break-up of total expenditure of entities registered or not registered under the GST:
1) Total Expenditure
2) Expenditure in respect of GST registered entity:
a) Relating to goods or services exempt from GST
b) Relating to entities falling under composition scheme
c) Relating to other registered entities
3) Relating to other registered entities
Expenditure relating to entities not registered under GST