Tax Audit Report – Form 3CA, 3CB, 3CD

What is a Tax Audit Report?

As per the Income Tax Act, Tax Audit as per Sec 44AB of the Income Tax Act is applicable to a business or profession in certain specified situations. Tax Audit Report is the report prepared by a Chartered Accountant in practice after auditing the books of accounts of a business. Under Tax Audit, the CA ensures whether the books of accounts are correctly prepared and the taxable income is accurately calculated as per the provisions of the Income Tax Act.

Check Tax Audit Applicability u/s 44AB
Check Income Tax Audit applicability u/s 44AB to file Tax Audit Report Form 3CB - 3CD with your Income Tax Return.
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Check Tax Audit Applicability u/s 44AB
Check Income Tax Audit applicability u/s 44AB to file Tax Audit Report Form 3CB - 3CD with your Income Tax Return.
Explore

In the case of an assessee to whom Tax Audit as per Section 44AB of the Income Tax Act is applicable, here are the next steps:

  • Appoint a Chartered Accountant in practice to audit the books of accounts
  • Chartered Accountant files Audit Report in Form 3CB-3CD or Form 3CA-3CD
  • Taxpayer files Income Tax Return in Form ITR 3

Tax Audit Report – Form 3CA, 3CB, 3CD, 3CE

The format of the Audit Report is specified by the Income Tax Department with specified particulars. Form 3CA and 3CB is the statement with auditors’ information while form 3CD is the statement with details of the tax audit.

Form Name Description
Form 3CA-3CD Tax Audit Report in the case of a taxpayer having business or profession income who is mandatorily required to get accounts audited under any other Act (other than Income Tax Act)
Form 3CB-3CD Tax Audit Report in the case of a taxpayer having business or profession income who is not required to get accounts audited under any other Act (other than Income Tax Act)
Form 3CE A Tax Audit Report in the case of a taxpayer who is a Non-Resident or Foreign Company receiving a royalty or fee for technical services

Due Date to Upload Tax Audit Report

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Guidance Note on Tax Audit

The Tax Audit Report has 2 parts – Form 3CA/3CB and Form 3CD. While Form 3CA/3CB is the statement with details of auditor, Form 3CD is the Statement with particulars required to be reported as per Sec 44AB of the Income Tax Act.

Form 3CA

Clause Information
Point no.1 Name, Address & PAN of taxpayer
Name of Auditor
Law under which accounts are audited
Date of Audit Report
Period of P&L Account
Date of the Balance Sheet
Point no.2 A declaration that the Audit Report Form 3CD is attached
Point no.3 Audit Observations or Qualifications as per Form 3CD
Point no.4

Name, Address, Membership Number of Auditor
Place & Date of Sign
Stamp & Seal of Auditor

Form 3CB

Clause Information
Point no.1 Date of Balance Sheet and P&L Statement
Name, Address, and PAN of Taxpayer
Point no.2 Address where books of accounts are kept
Address of branches (if books of accounts are kept at branches)
Point no.3 Observations, Comments, Discrepancies, and Inconsistencies reported by the auditor
Declaration by the auditor of:
* Obtaining all information required for audit
* Confirming that the business has maintained proper books of accounts
* Reporting that Balance Sheet and P&L Account reflects a true and fair view of the business
Point no.4 Declaration of attaching Form 3CD along with the Audit Report Form 3CB
Point no.5 Details of the Auditor – Name, Address, Membership Number, Firm Registration Number, Date, and Place

Form 3CD

It is a detailed statement with 44 different clauses filed by the auditor reporting information related to the business and its transactions for the relevant financial year. The IT Department has prescribed Form 3CD format and utility that a CA can use for filing the audit report.

Form 3CE

Clause Information
Point no.1 Name, Address & PAN of Non-Resident
Financial Year
Point no.2 Declaration of obtaining all information and explanations for audit
Point no.3 Certification on Permanent Establishment or Fixed Place of a profession in India
Point no.4 Declaration of income from royalty or fees for technical services under Section 44DA
Point no.5 Signature and Name of Auditor with stamp and seal

In addition to Form 3CE, details of income from royalty or fees for technical services should be mentioned in an Annexure.

Penalty for not filing Form 3CD

An assessee who is liable to get books of accounts audited as per Section 44AB fails to do so, the Assessing Officer i.e. A.O. may impose a penalty under Section 271B. The penalty shall be lower of the following:

  • 0.5% of Total Sales / Turnover of business or 0.5% of Gross Receipts of profession
  • INR 1,50,000

However, if the assessee can prove a reasonable cause for failure to get a tax audit done, the A.O. may not impose the penalty.

FAQs

If a taxpayer is required to do an audit under any other law, is it mandatory to do Tax Audit as per Income Tax?

Taxpayers like Company or Cooperative Society are required to do audits under their respective laws. The audit conducted under any other law may not provide a confirmation that the requirements of the Income Tax Act have been complied with. In such cases, if Tax Audit as per Section 44AB is mandatory, the audit report should be filed by the Chartered Accountant in prescribed form i.e. Form 3CA-3CD.

Is it possible to revise Tax Audit Report?

Yes. Tax Audit Report already filed can be revised. However, a valid reason for revising the audit report must be specified by the auditor. It must have a reference to the old Audit Report and must be signed in the current date. Generally, an audit report can be revised due to the following reasons:
1. Revision of accounts of the taxpayer
2. Change of law with a retrospective amendment
3. Change in the interpretation of provisions, CBDT circular, CBDT judgment, etc
4. Technical change in system or software

Got Questions? Ask Away!

  1. Hi @saik,

    Tax audit is applicable when your turnover is above the threshold or you have losses and your total income is above the basic exemption limit.
    If your total income is below the basic exemption limit of INR 2.5 lakh and your turnover is below the threshold - Tax audit is not applicable. You can carry forward the losses by reporting them when filing your ITR.

    You can use this tool to determine if tax audit is applicable to you.

    Learn more about tax audit

    Hope this helps

  2. Hey @saik

    1. You can carry forward the losses by filing ITR within due date without going through tax audit when your total income from all sources is below 2.5 lakhs and total turnover from trading activities does not cross the threshold limit of 5 crore.

    2. No other way except filing ITR. If you do not want to carry forward the losses while filing ITR, you can make the losses to be carried forward as 0 in “Schedule CFL”, but there is no way to report losses to ITD except filing ITR.

    Hope this helps!

  3. Muru says:

    Hi
    For FY 2020-2021
    I have made a loss of 2,36,532 with Turnover of 4,56,545 in option Trading
    I have a salary income of 1,30,000

    Should i pay tax
    which ITR should i file
    whether Audit is required.

    Please help.

  4. Hi @Muru

    F&O Income or Loss is a non-speculative business income or loss as per the Income Tax Act. Since you had options trading, ITR form applicable shall be ITR-3.
    Since your total income is less than Basic Exemption Limit i.e. INR 2,50,000 there seems to be no tax liability. You can check our Income Tax Calculator.
    For audit applicability, you can check the applicability here.

  5. Hi,

    As per the section 44AB and 44AD of the Income Tax Act - Tax Audit is applicable if:

    1. Turnover is above INR 1cr up to FY 2019-20 or INR 2 cr from FY 2020-21
    2. Incurred losses
    3. Profit is less than 6% of the turnover.

    Read more for Income Tax Audit Applicability

    Check Tax Audit requirement using the Determine Tax Audit Applicability tool

  6. Thanks for your response.

  7. Hi @KDN,

    Tax Audit is applicable when

    • Turnover is above the threshold
    • Profit is less than 6% of the turnover & income is more than the basic exemption limit.

    Since the income is below the basic exemption limit and the turnover is less the threshold tax audit is not applicable.

    We are getting the issue fixed in the above determine tax audit applicability tool.

  8. @inquisitive

    Yes, since your turnover is more than 25 lakhs you need to maintain the books of accounts and prepare the financials and file ITR 3.

    You can refer the below article for detailed applicability.

    Hope this helps !

  9. Hi @gurjot_ahluwalia,

    Under the presumptive taxation scheme, you can declare your profits at a predefined rate and let go of maintaining books of accounts.
    However, you cannot carry forward your losses under the presumptive taxation scheme.

    This article might be helpful to carry forward and set off losses

Continue the conversation on TaxQ&A

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