Tax Audit Checklist on Clause 20 of Form 3CD Under Income Tax Act, 1961

The clause 20 of Form 3CD, requires the tax auditor to report on the bonus/commission paid to employees-shareholders in companies/employees-partners, employees-shareholders in companies/employees-partners in LLPs. This clause also requires the reporting of details of deposits with appropriate authorities of contributions received from employees for various funds (PF/ESIC), including their due dates actual dates of deposits. To assist the auditor in complying with the reporting requirement of clause 20, following checklist can be used:

• Have you ascertained from books whether any bonus/commission, paid/payable to employees?
• Whether you have obtained the details of the commission or bonus paid/payable to employees during the year?
• Are payments of bonuses/commissions to these employee-shareholders in reality bonuses or commissions payable to employees qua employees for services rendered?
• Where bonus/commission paid to employees are genuine, whether you have verified the payment is made within the time allowed by section 43B?
• Whether you have obtained Management Representation Letter (MRL) from the assessee by way of a list of various contributions recovered from the employees that come within clause 20(b)?

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