𝐒 𝐉 𝐄𝐗𝐈𝐌 𝐒𝐞𝐫𝐯𝐢𝐜𝐞𝐬

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Dated: 31.03.2025

CBDT Notifies Key Amendments to Form 3CD for payments related to MSMEs

The Central Board of Direct Taxes (CBDT), under the Ministry of Finance, has issued Notification No. 23/2025, dated 28th March 2025, introducing substantial changes to Form 3CD under the Income-tax Rules, 1962. These amendments, made under the powers conferred by Sections 44AB and 295 of the Income-tax Act, 1961, will come into effect from April 1, 2025.

Key Amendments to Form 3CD:

1. Inclusion of Section 44BBC in Clause (12):

• Section 44BBC has been added to the clause related to reporting under presumptive taxation.

2. Omission of Defunct Deductions in Clause (19):

• References to now-defunct provisions 32AC, 32AD, 35AC, and 35CCB have been removed.

3. Addition in Clause (21) – Legal Proceedings Expense Disclosure:

• A new row has been added to disclose expenses incurred for settling proceedings related to contraventions under laws notified by the Central Government.

4. Revamped Clause (22) – MSMED Act Compliance:

• Detailed disclosure now required for:
  • Interest disallowed under Section 23 of MSMED Act.
  • Payments due under Section 15 of MSMED Act.
  • Split between amounts paid within time and beyond permissible period.

5. Clause (26) – Textual Corrections:

• Clarifications in wording for deductions under Section 43B.

6. Omission of Clauses (28) and (29):

• These clauses have been removed to streamline the audit report.

7. Enhanced Disclosure in Clause (31):

• For both loan/deposit transactions and repayments, the auditor must specify the mode using standardized codes.
• A dropdown format will be implemented using codes (A to L), e.g., Cash (A), Journal Entry – Credit (J), etc.

8. New Clause (36B) – Buyback of Shares Reporting:

• Assessee must now disclose:
  • Whether any amount was received from buyback of shares.
  • If yes, report the amount received and the cost of acquisition of shares.

Impact and Compliance:

These amendments bring greater clarity and strengthen compliance reporting for tax audit cases under Form 3CD. Particular focus is on:

• Timely payments under MSMED Act.
• Reporting of share buybacks.
• Accurate classification of payment/receipt methods.

Effective Date:

All these changes are applicable from April 1, 2025, for tax audits conducted for Financial Year 2024-25 onwards.

Conclusion:

With Notification No. 23/2025, the CBDT enhances transparency, strengthens statutory reporting requirements, and aligns tax audit disclosures with recent regulatory and legislative developments. Taxpayers and auditors are advised to update their systems and practices in time for the new audit cycle.

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Source: CBDT, Ministry of Finance, Govt. of India

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