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CBDT Changes Form 3CD from AY 2021-22 || Allows Revised Tax Audit Report

cbdt-changes-form-3cd-from-ay-2021-22-allows-revised-tax-audit-report

CBDT has amended the Tax Audit Report (TAR) in Form 3CD vide Notification No. 28/2021 in G.S.R. 246(E) dated 1.4.2021 by Income-tax (eighth Amendment) Rules, 2021 in order to incorporate the changes brought in the Income Tax Act, 1961 (“Act”) by the Finance Act, 2021. These changes in Form 3CD shall be effective from the 1st day of April 2021 and shall apply for the assessment year 2021-22.


The notification of 1st April has brought in 6 (six) changes to Tax Audit Report which is applicable from AY 2021-22.


The changes introduced in the Tax Audit Form in Form 3CD from the AY 2021-22 are outlined below-


1. Revised Tax Audit Report in certain cases


The Notification has allowed revising an already filed Tax Audit Report for recalculation of disallowances under section 40 or section 43B. The revised TAR shall be filed after being verified and signed by a Chartered Accountant. However, such a revised Tax Audit Report shall be filed before the end of the relevant assessment year. 



Readers are aware that Finance (No. 2) Act, 2019 has amended the provisions related to the filing of the Tax Audit Report. As per the new law,  a tax audit report is required to be filed one month prior to the due date of filing of return of income u/s 139(1).


Section 43B allows deduction of certain expenditure on actual payment basis. Such expenses are allowed as deduction in the previous year in which it is incurred provided the same is paid on or before the due date of filing of return u/s 139(1).


Hence there was an inconsistency in the two provisions since the tax audit report requires reporting of expenses disallowable under section 43B for the previous year. 


It may so happen that expenditure incurred in a previous year may be paid before the due date of return but after the filing of the tax audit report which is one month prior to the due date of furnishing the return of income under section 139(1).



In order to remove the inconsistency in the two provisions, it is now allowed to revise the Tax Audit Report to claim the deduction of expenses under section 43B if the same was disallowed in the original tax audit report. 


Time limit to revise TAR: A TAR is allowed to be revised for a limited purpose only. A Tax Audit Report is allowed to be revised before the end of the relevant assessment year.


Amendment in Rule 6G: Rule 6G prescribes rules related to reporting of the audit of accounts to be furnished under section 44AB. For allowing filing of revised Tax Audit Report, Rule 6G is amended to insert a sub-rule (3) as mentioned below-


(3) The report of audit furnished under this rule may be revised by the person by getting 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 report under sub- rule (1) and (2) which necessitates recalculation of disallowance under section 40 or section 43B.


2. Changes in Clause 8a to report exercise of option under section 115BAC/115BAD


Existing Clause 8a of Form 3CD requires reporting of exercise of an option by the assessee under section 115BA/115BAA/115BAB.


Finance Act, 2020 has introduced two new concessional tax rate regime under section 115BAC for Individuals and HUF and section 115BAD for cooperative societies. The two provisions are applicable from AY 2021-22.


In order to incorporate the same in the Tax Audit Report, Clause 8a of Form 3CD is changed to include these two sections - section 115BAC and section 115BAD also.


For this clause, clause 8a is amended as mentioned below-


8A Whether the assessee has opted for taxation under section 115BA/115BAA/115BAB/ 115BAC/115BAD?


It should be noted that Clause 8a was introduced in Form 3CD from AY 2020-21 vide Notification No. 82/2020 dated 01.10.2020.


3. Amendment in Clause 17 to report higher safe harbour rule of 20% between actual sales consideration and stamp duty value under section 43CA and section 56(2)(x)


Existing Clause 17 of Form 3CD requires to report the transfer of any land or building or both during the previous year for a consideration less than the value adopted or assessed or assessable by any authority of a State Government as per section 43CA or 50C.


Finance Act, 2021 has amended the provisions of section 43CA and section 56(2)(x). In order to boost demand in the real-estate sector and to enable the real-estate developers to liquidate their unsold inventory at a rate substantially lower than the circle rate and giving benefit to the home buyers, it is provided to increase the safe harbour from 10% to 20% under section 43CA for the period from 12th November 2020 to 30th June 2021 in respect of the only primary sale of residential units of value up to Rs. 2 crore. Consequential relief by increasing the safe harbour from 10% to 20% was also allowed to buyers of these residential units under section 56(2)(x) for the said period. Therefore, for these transactions, the circle rate shall be deemed as a sale/purchase consideration only if the variation between the agreement value and the circle rate is more than 20%.


These changes are now incorporated in Form 3CD from AY 2021-22. For this purpose, existing clause 17 is substituted with the following new Clause 17-


17. Where any land or building or both is transferred during the previous year for a consideration less than value adopted or assessed or assessable by any authority of a State Government referred to in section 43CAor 50C,please


Details of property

Consideration received or accrued

Value adopted or assessed or assessable

Whether provisions of second proviso to sub- section (1) of section 43CA or fourth proviso to clause (x) of sub-section (2) of section 56 applicable?

[Yes/No]






4. Changes in Clause 18 related to Adjustment in WDV of Assets 


For exercising option under sections 115BAC/115BAD


Clause 18(ca) was introduced in the Form 3CD for the AY 2020-21 vide Notification No. 82/2020 dated 01.10.2020 to report the adjustment in WDV of the block of assets if lower tax regime under section 115BAA is exercised by the assessee.


This clause was valid for AY 2021-22 only. As stated earlier, Finance Act, 2020 introduced two new concessional tax rate regimes under section 115BAC for Individuals and HUF and section 115BAD for cooperative societies. The two provisions are applicable from AY 2021-22.


In these cases also additional depreciation is not allowed and hence requires adjustment in WDV of the block of assets. Hence Clause 18(ca) is substituted with the following new sub-clause (ca) which is applicable for AY 2021-22 only-


(ca) Adjustment made to the written down value under section 115BAC/115BAD (for assessment year 2021-2022 only)……


Changes in Clause 18 of Form 3CD related to Depreciation of Goodwill


Finance Act, 2021 has amended the provisions of section 32 to deny depreciation on goodwill. It is further provided that the block containing the goodwill as an asset shall be modified and depreciation on goodwill as appearing in that block at the WDV as of 1.4.2020 shall not be claimed from AY 2021-22 and such value of goodwill will be excluded from the block. The block needs to be modified to that extent. Form 3CD has made the necessary changes in clause 18.


For this purpose, a new sub-clause (cb) is inserted in Clause 18 of Form 3CD for reporting the adjustment in WDV of the block of assets in the following manner-


(cb) Adjustment made to written down value of Intangible asset due to excluding value of goodwill of a business or profession…..


5. Changes in Clause 32 to report adjustment in brought forward of losses if option u/s 115BAC/115BAD is exercised


The new tax regime under section 115BAA, section 115BAC and section 115BAD do not allow certain deductions and if the option under these provisions is exercised then the brought forward losses need to be modified to the extent they are related to such restricted disallowed deductions.


Thus, similar to changes in clause 8a and clause 18, Clause 32 of the Form 3CD is also amended to include section 115BAC and section 115BAD in the reporting requirement. 


For this purpose, Clause 32 of Form 3CD is substituted with the following new clause-

(a) Details of brought forward loss or depreciation allowance, in the following manner, to the extent available:


Serial   Number

Assessment Year

Nature of loss/ 

allowance (in 

rupees)


Amount 

as returned* 

(in rupees)


All 

losses/allowances not allowed under section  115BAA/ 115BAC/115BAD

Amount as adjusted by 

withdrawal of additional 

depreciation on account of opting for taxation under 

section 

115BAC/115BAD^

Amounts 

as assessed 

(give reference 

to relevant order)


Remarks

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)


*If the assessed depreciation is less and no appeal pending then take assessed. 


^To be filled in for assessment year 2021-2022 only.


6. Omission of Clause 36 related to DDT


The amended Form 3CD has removed clause 36 from the reporting requirement from AY 2021-22.


Finance Act 2020 has abolished the Dividend Distribution Tax (DDT) and reverted the classic system of taxation of dividend income in the hands of the shareholders/recipients. Hence companies are not required to pay any dividend distribution tax from FY 2020-21.


These changes are now incorporated in Form 3CD. Clause 36 of the existing Form 3CD is omitted. Henceforth, no reporting is required in Form 3CD for DDT.


Read the full text of Notification No. 28/2021 dated 1.4.2021 on Changes in Form 3CD from AY 2021-22


MINISTRY OF FINANCE 

(Department of Revenue) 

(CENTRAL BOARD OF DIRECT TAXES) 


NOTIFICATION 


New Delhi, the 1st April, 2021 


(INCOME-TAX)


G.S.R. 246(E).––In exercise of the powers conferred by section 44AB read with section 295 of the Income-tax Act (43 of 1961), the Central Board of Direct Taxes, hereby, makes the following rules further to amend the Income-tax Rules, 1962, namely:-


1. Short title and commencement.–


(1) These rules may be called the Income-tax (eighth Amendment) Rules, 2021.


(2) They shall come into force on the date of their publication in the Official Gazette.


2. In the Income-tax Rules, 1962,-


(a) in rule 6G, after sub-rule (2), the following sub-rule shall be inserted, namely:-


“(3) The report of audit furnished under this rule may be revised by the person by getting 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 report under sub- rule (1) and (2) which necessitates recalculation of disallowance under section 40 or section 43B.”;


(b) in Appendix II, in Form 3CD,-


(i) in PART –A for clause 8A, the following clause shall be substituted, namely: -


“8A Whether the assessee has opted for taxation under section 115BA/115BAA/115BAB/ 115BAC/115BAD?.”;


(ii) in PART-B, for clause 17,the following clause shall be substituted, namely:-


“17. Where any land or building or both is transferred during the previous year for a consideration less than value adopted or assessed or assessable by any authority of a State Government referred to in section 43CAor 50C,please


Details of property

Consideration received or accrued

Value adopted or assessed or assessable

Whether provisions of second proviso to sub- section (1) of section 43CA or fourth proviso to clause (x) of sub-section (2) of section 56 applicable?

[Yes/No]






(iii) in clause 18, for sub-clauses (ca) and (cb), the following sub-clauses, shall be substituted namely:-


(ca) Adjustment made to the written down value under section 115BAC/115BAD (for assessment year 2021-2022 only)……


(cb) Adjustment made to written down value of Intangible asset due to excluding value of goodwill of a business or profession…..


(cc) Adjusted written down value……….”;


(iv) in clause 32, for sub-clause (a), the following sub-clause shall be substituted, namely:-


(a) Details of brought forward loss or depreciation allowance, in the following manner, to the extent available:


Serial   Number

Assessment Year

Nature of loss/ 

allowance (in 

rupees)


Amount 

as returned* 

(in rupees)


All 

losses/allowances not allowed under section  115BAA/ 115BAC/115BAD

Amount as adjusted by 

withdrawal of additional 

depreciation on account of opting for taxation under 

section 

115BAC/115BAD^

Amounts 

as assessed 

(give reference 

to relevant order)


Remarks

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)


*If the assessed depreciation is less and no appeal pending then take assessed. 


^To be filled in for assessment year 2021-2022 only.’’:


(v) clause 36 shall be omitted. 


[Notification No. 28 /2021/F. No 370142/9/2018-TPL]

ANKIT JAIN, Under Secy. (Tax Policy Legislation)


Note: The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii) vide notification number S.O. 969 (E), dated the 26th March, 1962 and was last amended vide notification number G.S.R. 242 (E) dated 31.03.2021


Download Copy of Notification No. 28/2021 dated 1.4.2021 on Changes in Form 3CD from AY 2021-22 in pdf format


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