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A tax audit is a detailed review of a taxpayer’s financial records conducted by a Chartered Accountant to verify compliance with income tax laws. Under Section 44AB of the Income Tax Act, certain taxpayers are required to get their accounts audited and submit the audit report in specified formats, Form 3CA, 3CB, or 3CE, depending on their business structure and type of income.
Recently, the Central Board of Direct Taxes (CBDT) has made significant changes to these audit forms. This guide will walk you through everything you need to know about tax audit forms, their applicability, recent changes, and what taxpayers and professionals should keep in mind for smooth and compliant filing.
Updates in Tax Audit Forms in FY 2024-25
Along with refining several clauses of Form 3CD, the Income Tax Department has added new disclosure requirements, which change the reporting processes for tax audits done under Section 44AB. Here are some of the significant changes –
Clause 12 – Introduction of Section 44BBC
It is a new presumptive scheme for qualified professionals. Section 44BC mandates non-resident cruise ship operators to make disclosures under this section.
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Clause 19 – Removal of Ineligible Deductions
The removal of sections 32AC, 32AD, 35AC, and 35CCB has led to the removal of outdated deductions for more accurate filings.
Clause 21 – Expanded Scope
Reporting of legal expenses for settlements pertaining to contraventions as specified by the concerned Ministry is now mandatory.
Clause 22 – Completely Revamped
This clause now mandates disclosure of:
- Disallowed interest as per Section 23 of the MSMED Act, 2006.
- Outstanding dues to MSMEs as per Section 15 of MSMED Act.
Clause 26 – Updated Language
The language has been updated to improve clarity in reporting, with more precise terminology and references to the latest tax allowances.
Clauses 28 & 29 – Omitted
These clauses have been removed since they are no longer relevant.
Clause 31 – Enhanced Reporting
New transaction types must now be reported with specific codes, covering:
- Cash payments/receipts
- Non-account payee cheques
- Journal entries, and more
Also mandates detailed disclosures of loan and deposit transactions.
Clause 36B – New Requirement
Mandatory reporting of buyback of shares undertaken during the year.
What is a Tax Audit?
Under the Income Tax Act, 1961, a tax audit is an examination of a taxpayer’s accounts by a full-time Chartered Accountant. The CA must submit the audit report in the prescribed form along with required details.
Section 44AB specifies when a tax audit is mandatory. It aims to verify financial accuracy and prevent fraud or tax evasion.
What is a Tax Audit Report?
Tax audit report is a summary of the audit findings and must be furnished by the auditor in th prescribed audit forms. The tax auditor must present their findings in a report using specific ‘Audit Forms’ prescribed by the Income Tax Department. Under Section 44AB, the auditor is required to use Form 3CA or 3CB, along with Form 3CD. The Chartered Accountant files the tax audit report electronically on the Income Tax portal. Once filed, the taxpayer must log in to their e-filing account and approve the report.
When is Tax Audit Applicable Under Section 44AB?
Tax Audit is applicable under section 44AB for FY 2024-25 in the following cases –
Condition Applicability (FY 2024-25)
| Business turnover exceeds ₹1 crore | Tax audit mandatory |
| Turnover between ₹1 crore to ₹10 crore & cash receipts/payments > 5% | Tax audit mandatory |
| Turnover between ₹1 crore and ₹10 crore & cash receipts/payments ≤ 5% | Tax audit not required |
| Turnover exceeds ₹10 crore (regardless of cash/digital split) | Tax audit mandatory |
| Presumptive income (Section 44AD) opted & income < 8% (cash) or 6% (digital) | Tax audit mandatory |
| Presumptive scheme not opted despite eligibility | Tax audit may be applicable |
Which are the Audit Forms Applicable Under Section 44AB?
There are two major types of audit forms that are applicable to the individuals requiring tax audit, i.e., 3CA and 3CB. Along with both forms, taxpayers are required to file Form 3CD in all tax audit cases.
The table below shows the tax audit forms and their applicability under different conditions –
Form Name Description
| Form 3CA-3CD | Applicable when the taxpayer has business or professional income and is already required to get accounts audited under a law other than the Income Tax Act. |
| Form 3CB-3CD | Applicable when the taxpayer has business or professional income but is not required to get accounts audited under any other law except the Income Tax Act. |
| Form 3CE | Applicable to non-residents or foreign companies receiving royalty or fees for technical services in India. |
Types and Structure of Tax Audit Forms
Form 3CA
This form applies to taxpayers engaged in a business or profession who are already required to get their accounts audited under any law other than the Income Tax Act. It includes the auditor’s report and key details of the audit conducted.
For example, a company that must get its accounts audited under the Companies Act, 2013 will submit Form 3CA.
Structure
Part 1
- Name, Address and PAN of the taxpayer
- Name of the Auditor
- Law under which accounts have been audited
- Date of furnishing the audit report
- Period of Profit & Loss Account
- Date of the Balance Sheet
Part 2
- Declaration of attaching Form 3CD along with the audit report.
- Audit Observations/ Qualifications found in Form 3CD details.
- Place & Date of signing audit report.
- Name, Address, and Membership Number of the Auditor.
- Stamp/ Seal of the Auditor.
Form 3CB
Part 1
- Balance Sheet Date
- Period of Profit & Loss Account
- Name, Address and PAN of the Taxpayer
Part 2
- Address, where the books of accounts are kept
- Branch Address
Part 3(a)
- Audit Observations/ Qualifications/ Comments/ Discrepancies.
Part 3(b)
- Declaration by the auditor regarding –
- Obtaining all the information and explanations necessary for the audit.
- Assurance that the organization (including branches) maintains proper books of accounts.
- Balance sheet and Profit & Loss Account gives a true and fair view.
Part 4
- Declaration of attaching Form 3CD along with the audit report.
Part 5
- Audit observations/ discrepancies found in the details related to Form 3CD.
Part 6
- Place & Date of signing audit report.
- Name, Address, and Membership Number of the auditor.
- Stamp/ Seal of the auditor.
Form 3CD
This form applies to taxpayers engaged in a business or profession who are not required to get their accounts audited under any other law. It includes the auditor’s report and key audit details.
For example, a proprietorship or partnership firm with a turnover exceeding ₹1 crore, and not opting for the presumptive income scheme, doesn’t need an audit under any law other than the Income Tax Act. Such entities must submit Form 3CB.
In addition to Form 3CA or 3CB, the tax auditor must also file Form 3CD, which is part of the audit report and contains detailed prescribed particulars.
Form 3CE
Non-residents and foreign companies receiving royalty or fees for technical services from the Indian government or an Indian entity must get their accounts audited. The auditor must submit the audit report in Form 3CE, along with an annexure containing the required details.
Part 1
- Name, Address and PAN of the employer
- Financial year
Part 2
- Declaration about obtaining all the information and explanations necessary for the audit
Part 3
- Certification about the permanent establishment in India
Part 4
- Declaration of the income from royalty/ fees for technical services under section 44DA for the relevant assessment year,
Part 5
- Signature and name of the Auditor along with stamp/ seal
Details relating to income by way of royalty or fees for technical services will have to be mentioned in the Annexures that are a part of this form.
What is the Due Date for Obtaining the Audit Report?
A taxpayer is required to obtain a tax audit report on or before 30th September of the relevant FY, unless it is otherwise extended by the Income Tax Department.
What is the Penalty for Not Filing the Audit Report?
If the books of accounts are not audited or the audit report is not filed, the taxpayer might have to pay a penalty upto 0.5% of the total sales, turnover, or gross receipts, subject to a maximum of ₹1,50,000 under Section 271B.
However, the penalty will not apply if the taxpayer can justify the delay with a valid reason. Acceptable reasons include:
- Death or physical incapacity of the partner responsible for maintaining accounts
- Resignation of the tax auditor
- Labour issues such as strikes or lockouts
- Natural calamities
- Loss of accounts due to theft, fire, or other uncontrollable events
Understanding tax audit requirements and the correct use of Forms 3CA, 3CB, 3CD, and 3CE is essential for ensuring compliance under Section 44AB of the Income Tax Act. With the recent updates introduced by the CBDT, it’s more important than ever for taxpayers and professionals to stay informed and file audit reports accurately and on time. This guide aims to simplify the complexities around tax audit forms and help you navigate the filing process with confidence and clarity.
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Frequently Asked Questions
Q- Who is required to undergo a tax audit?
Taxpayers engaged in a business or profession must get a tax audit done if their turnover, gross receipts, or net profit exceeds the prescribed threshold under Section 44AB of the Income Tax Act.
Q- Is tax audit applicable every year once it applies in one year?
No, tax audit applicability is evaluated separately for each financial year. Just because a tax audit was required in one year does not mean it will be required in the following years.
Q- Can professionals claim the increased ₹10 crore turnover limit for tax audit exemption in case of digital transactions?
No, the enhanced limit of ₹10 crore applies only to businesses. Professionals are not eligible for this benefit, even if all transactions are digital.
Q- What is the due date for filing the tax audit report?
The tax audit report must be filed by 30th September following the end of the financial year.
For the Financial Year 2024–25, the due date is 30th September 2025.
Q- What are the main stages of the tax audit process?
The tax audit process involves three stages:
- Pre-audit stage – Preparation and planning
- Field-audit stage – Examination of records and data
- Post-audit stage – Finalization and submission of the audit report
Q- Can a tax audit report be revised?
Yes, a tax audit report can be revised under certain conditions, such as:
- Change in the interpretation of tax laws
- Discovery of errors due to software issues
- Revision due to events like company adoption of accounts in the AGM
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