[Opinion] Form 3CD Revisions 2025 – Key Changes | Challenges | Reporting Guide

CA Siddharth Patel – [2025] 175 taxmann.com 494 (Article)

1. Introduction

The Central Board of Direct Taxes (CBDT) has notified important changes to Form 3CD, the Tax Audit Report, via a notification dated 28th March 2025 bearing no. G.S.R. 207(E). These amendments are applicable for the financial year 2024–25 and will affect all audit reports issued on or after this date. The objective of these changes seems to align the reporting format with recent amendments to the Income Tax Act and related legal developments.

The revised format mandates enhanced disclosures and seeks to ensure better compliance with newly introduced provisions, while also omitting certain existing clauses that are no longer relevant in the current context. This article summarises the key changes and attempts to interpret the rationale behind these amendments, with the objective of providing a broader perspective that may aid in the effective adoption of the revised requirements.

Each amendment is analysed under two broad aspects:

• The nature of the change introduced and
• The likely rationale for its introduction

Let us now delve into the analysis of these changes.

2. Key Changes in Form 3CD (as per Notification dated 28.03.2025)

2.1. Reporting under New Section 44BBC – Clause 12

Change Introduced:

Insertion of Section 44BBC under Clause 12 of Form 3CD.

Likely reason for change

Section 44BBC, recently inserted in the Income-tax Act, provides for special provisions in respect of non-resident operators of cruise ships. The Tax Audit Report has been amended to include this new section for appropriate disclosure, as it now applies to specified assessees from FY 2024–25 onward.

2.2. Omission of Deductions No Longer Admissible – Clause 19

Change Introduced:

The following sections have been omitted from Clause 19:

• Section 32AC – Investment in new plant or machinery
• Section 32AD – Investment in notified backward areas
• Section 35AC – Expenditure on eligible projects
• Section 35CCB – Expenditure on agricultural extension projects

Likely reason for change

Since deductions under these sections are no longer admissible, their reporting has been removed from the tax audit framework to ensure relevance and clarity.

2.3. Additional Disclosure under Clause 21(a) – Section 37(1)(iv)

Change Introduced:

In Clause 21(a), an additional reporting row has been inserted:

“Expenditure incurred to settle proceedings initiated in relation to contravention under such law as notified by the Central Government in the Official Gazette in this behalf.”

Likely reason for change

Recently, a new sub-clause (iv) has been added to Section 37(1), effective from 1st April 2025, which reads:

“Expenditure incurred to settle proceedings initiated in relation to contravention under such law as may be notified by the Central Government in the Official Gazette in this behalf.”

The expenditures referred to above are now deemed to be in the nature of penalties or offences and are therefore disallowed under Section 37(1) of the Income-tax Act, 1961. To align with this amendment in section 37 of the Act, a corresponding reporting requirement has been incorporated in the Tax Audit Report. This ensures that such disallowable expenditures are appropriately disclosed in the Tax Audit Report as well.

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