Checklist for Clause 13 of Form 3CD in Tax Audit Under Income Tax Act

Section 145 provides that the income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” must be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Further, in accordance with Section 128 of the Companies Act, 2013, every company is required to keep books of account on an accrual basis. The provisions of the Companies Act, 2013 are, however, not applicable to entities other than companies further during the year there has been any change in the method of accounting employed vis-à-vis the method employed in the immediately preceding previous year is to be stated.

In this story, we have discussed the detailed checklist for tax audit from sub-clause (a) to Clause (f) of Clause 13 which includes considerations for ICDS. Sub-clauses (a) to (c) of Clause 13 are relevant for all taxpayers, while sub-clauses (d) to (f) specifically pertain to taxpayers using the mercantile system of accounting, aligning with the ICDS requirements stipulated under section 145(2).

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