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Forms 3CA, 3CB, 3CD & 3CE

It is that time of the year again, when everyone must file their income tax returns. The Income Tax Act of 1961 has established specific forms for the purpose of documenting particular information, commonly known as Indian tax forms. These are in line with the Income Tax rules which are said to simplify the procedure of filing Income Tax returns in India.

Form 3CA

One of the significant forms utilised in the procedure of filing Income Tax returns in India is the Form 3CA. It is an Audit Report indenture. An Audit Report is a statement that is controlled and managed in accordance with Section 44AB of the Income Tax Act, 1961. Specific rules for utilising this form is prescribed in the Income Tax Act of 1961 under Rule 6G (1) (a). At the time of filing income tax returns, the assessee or the examiner must use a catalogue of forms that has been executed by the Income Tax Department of India. A detailed list regarding the regulations and rules pertaining to the usage of these forms has been concocted by the Income Tax rules of 1962 and the Income Tax Act of 1961. After the occupation and vocation of the assessee goes past an audit that is done by a lawfully recognised chartered account who is holding full time Certificate of Practice, only then is it submitted.

Form 3CB

In compliance with the rules set by the Income Tax Department of India, Form 3CB is a stipulated composition of an audit report. In relevance to the procedure of filing income tax returns, form 3CB needs to be deployed only for particular assessees on the basis of specific provisions and regulations. In accordance with the governance of Section 44AB of the Income Tax Act and Clause (b) of the sub rule (1) under Rule 6G, form 3CB is an audit report. Form 3CB is specifically controlled and managed by provisions prescribed in rule 6G (1) (b). The procedure of filing Income Tax returns in India is ruled by the Income Tax Act of 1961 as well as the Income Tax Rules of 1962. This form is needed to be yielded on the part of a person who controls the business or profession and does not have to be involved into the accounts of the organisation audited according to any law other than the Income Tax Act, 1961.

Form 3CD

Form 3CD stands as a format of Audit Reports in India. Tax auditors of only a particular section of assessees can file this audit report. The rules and regulations for the utilisation of this form is promulgated with clarity by the Income Tax Department of India. In keeping with Section 44AB of the Income Tax Act of 1961 as well as Rules 6G (2), Form 3CD has been fabricated. To the Audit Report, form 3CD functions as an Annexure. It includes 32 Clauses and is an integral aspect of filing Income Tax returns in India. Form 3CD needs to be prepared by the management of the said business. The Tax Auditor examines the form and then submits it to the Tax Auditing Authority. Following this, the information provided in Form 3CD is then validated and confirmed by the Tax Auditing Authority.

Form 3CE

Form 3CE is another important format for audit reports for the purpose of filing Income Tax Returns for a particular section of Assessees in India. The methods of utilising this form as well as the regulations and rules pertaining to it are laid down by the Income Tax Department of India. Form 3CE is an aspect of filing Income Tax Returns and being an audit report format, it is needed by Section 44DA. This form is based on Section 44DA (2) of the Income Tax Act, 1961 and Rule 6GA. Form 3CE is particularly for non-residents of India or foreign companies doing business in India. Other documents along with an accounts book should be properly maintained and updated. The verification is done with the help of chartered accountants or Auditing Authorities. The accounts are to be audited and given along with Income Tax Returns.

Prescribed Audit Forms

The Audit Reports have to be purveyed in the forms below:

  • Form 3CA: For a person paying taxes and taking on a business or profession and who is in the process of getting his accounts audited as per any other law than the income tax law.
  • Form 3CB: For a person paying taxes who has a business or a profession and is not required to get his or her accounts revised as per any other law.
  • Form 3CD: This form is a statement of particulars and is a part of the Audit Report. All information regarding the business and all its transactions are required to be mentioned and filled accurately wherever asked.
  • Form 3CE: This form is for people who do not live in India or foreign organisations that are paid fees by the Indian government or Indian organisations that are supposed to get their accounts revised.

Particulars of forms 3CA, 3CB, 3CD & 3CE

Form 3CA

  • Details like name, address and Permanent Account Number of the taxpayer.
  • Beginning and end date of profit and loss account as well as income and expenses account.
  • Auditor’s name
  • Laws applicable on the basis of which the auditing took place.
  • Audit report date
  • Details of balance sheet
  • Pronouncement of adjunction Form 3CD with the audit report
  • Qualifications and audit observations noted with respect to Form 3CD
  • Membership Number as well as name and address of the auditor
  • Venue and date of signing the audit report
  • Auditor’s stamp or seal

Form 3CB

  • Information regarding taxpayer’s name, address and PAN
  • Start to end date accounts of profit and loss as well as income and expenditure
  • Balance sheet date
  • Location name of where the book accounts are generally kept
  • Name and location of branches
  • 3 (a): Observations of the audit, qualifications, other remarks or disparity
  • 3 (b): Auditor’s statements on the information and reasons for the significant audit, surety that the enterprise along with its branches conserve efficient account books, authentic balance sheet and profit & loss account
  • A statement declaring the accoutrement of Form 3CD with the audit report
  • Any dissimilarities and audit observations obtained pertaining to Form 3CD
  • Location and date while signing the audit report
  • Membership number, name and address of the auditor
  • Stamp or seal of the auditor

Form 3CD

  • Name, address and PAN of the taxpayer
  • If the taxpayer is responsible for paying service tax, sales tax, customs duty and other such excise duty, then the registration number must be provided
  • Dates of the previous and current assessment year
  • Specify the applicable clause of Section 44AB in regards to which the audit has been done
  • This form has a 41-points statement of particulars. Each and every specific detail with respect to the different parts of the business and its transactions are required to be mentioned, wherever asked

Form 3CE

  • The non-residents name, address and PAN
  • Mention of the financial year for which the audit has been conducted by the auditor
  • Statement that declares all the relevant information and explications for the audit
  • Certificate that serves as a proof regarding the permanent organisation in India
  • Promulgation of income from technical service fees and royalty
  • Name and signature of the auditor
  • Stamp and seal of the auditor

Due date of obtaining the audit report

According to Section 44AB, an individual must get his or her accounts audited and must also receive the audit report on or before the end date of filing the income tax return, which is on or before the 30th of September 2019. In the case of assessees that have to present a report as per Section 92E, the due date for filing income tax return is 30th November 2019. The chartered accountant has to electronically file the tax audit to the Income Tax Department. Once this is done, the taxpayer has to approve the report from his account.

Penalty for not filing the audit report

There is a penalty involved if the taxpayer doesn’t get his or her accounts audited or gets the audit report filed. Nevertheless, no penalty will be charged on the taxpayer, if he or she has a genuine reason for not doing the same. In other cases, as per Section 271B, the officer can levy a minimal penalty of 0.5% from the total sales, income or gross receipts, the maximum amount can go up to Rs. 1,50,000.

Frequently Asked Questions

What are forms 3CA, 3CB and 3CD?

Form 3CA, 3CB and 3CD are basically prescribed forms that auditors use to present tax audit reports. For audit reports, the form prescribed is Form 3CB and the stipulated particulars are to be reported in Form 3CD.

What is tax audit?

The term ‘audit’ refers to a check, inspection or a review. Various laws prescribe different kinds of audits. For example, company laws require company audits. Similarly, from the perspective of an income tax law, income tax laws require an individual i.e. the taxpayer to get his or her accounts of the business or profession audited. In Section 44AB, the class of individuals or taxpayers that are required to get their accounts audited from a relevant chartered account are given, along with the rules and regulations. In the audit report, the auditor is required to give her or her observations, discrepancies, findings, etc. The auditor gives the report of this tax audit in forms 3CA, 3CB AND 3CD.

Is there a penalty for not getting accounts audited?

Yes, there is a penalty for not getting accounts audited. As per Section 271B, if individuals that need to be in accordance with Section 44AB, do not get their accounts audited for any particular year or do not furnish audit reports, a penalty can be levied on them. They can be charged 0.5% of their total sales, gross receipts or income, whichever is lower. The maximum penalty charged is Rs. 1,50,000.

Is it necessary to maintain any proof or record of earnings?

Yes, it is necessary to maintain a proof or record of earning for any kind of income as specified in the Income Tax Act. If such records or proofs are not maintained, then the individual needs to procure justifiable records through which he or she can support the claim.

What is meant by an assessing officer?

The Income Tax Department has specific officers that have the authority over a particular class of people in a particular location or geographical area. They are called assessing officers. You can obtain information regarding the same from the departmental website or the PRO.

What is the main objective of a tax audit?

Firstly, the objective of a tax audit is to discern and verify the requirements of certain forms (3CA, 3CB& 3CD). Secondly, tax audits are done for tax purposes. They ascertain that the books of accounts and various records are diligently maintained and kept, so as they authentically display the income of the taxpayer as well as the claims are accurately made by him or her. Thirdly, tax audits also assist in keeping a track of duplicitous practices. Alongwith presenting accounts accurately, it also enables the administration of tax laws through an effective procurement of accounts. Thus, this saves a lot of time and effort of the assessing officers that carry on with everyday verification procedures like totalling, accuracy and validation of whether the purchase and sales are properly corroborated or not. This saves time of the assessing officers which can then be utilised for more important cases where investigation is really required.

For an individual carrying on a profession, is it important to get his or her accounts audited?

For an individual carrying on a profession, if his or her gross receipts exceeds Rs. 50 lakhs in a year, only then he or she needs to get the accounts audited. According to Section 44AB, it is imperative and compulsory for such persons to get their account audited.

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