Form 3CD Checklist for AY 2026–27: Key Disclosures and Reconciliations

Form 3CD Checklist: Key Disclosures for Tax Audit 2026

Form 3CD is part of the tax audit report under Section 44AB. For the year 2025–26, which is the assessment year 2026–27, the Central Board of Direct Taxes has made changes to many clauses. These changes are meant to increase transparency, improve data accuracy and make disclosures more complete. Not reporting or missing required information can result in notices from the tax department, penalties and even audit qualifications.

Taxpayers and auditors must follow the new Form 3CD structure as given in CBDT Notification No. 23/2025. This checklist shows the disclosures that need close attention. Being in line with these changes is important to prevent problems during the audit process.

Critical Clauses and What to Disclose

Clause 12 (Presumptive Income): Report income under Sections 44AD, 44ADA, 44AE, 44B, 44BB, 44BBA, 44BBB, and the newly added Section 44BBC (cruise ship operators). Section 44BBD (electronics manufacturing services) is covered under “any other relevant section.” Ensure presumptive income is reconciled with the profit and loss account.

Clause 19 (Deductions): Several deduction sections have been omitted, including 32AC, 32AD, 35AC, and 35CCB. Do not report claims under these sections. Focus on eligible deductions like scientific research, preliminary expenses, and employee contributions.

Clause 21 (Regulatory Settlements): Disclose any expenditure incurred to settle legal proceedings for contraventions under notified laws. This is a new requirement aimed at transparency in regulatory compliance costs.

Clauses 22 and 26 — MSME Payments and Section 43B(h) : These clauses require particular attention. Clause 22 requires reporting of interest inadmissible under Section 23 of the MSMED Act and specified amounts payable to micro and small enterprises under Section 15, including amounts paid within and beyond the prescribed period. Clause 26 separately captures amounts disallowable under Section 43B, including sums payable to micro or small enterprises beyond the time limit specified under Section 15 of the MSMED Act. For Section 43B(h), payment by the income-tax return filing due date does not override the specific MSMED Act payment timeline. 

Clause 31 (Loans and Deposits): Report all loans, deposits, and specified advances under Sections 269SS, 269T, and 269ST using transaction codes (cash, cheque, journal entry, etc.). Include non-cash settlements and book adjustments. Cash receipts or repayments of ₹2 lakh or more attract scrutiny.

Clause 36B (Share Buyback): Disclose whether you received any amount from share buyback. If yes, report the amount received and the cost of acquisition. This is a new disclosure to track buyback proceeds.

Clause 44 (GST Expenditure Breakup): Continue to report total expenditure based on suppliers’ GST registration status (registered, composition, exempt, unregistered). Reconcile this with your profit and loss account, excluding non-expense items like depreciation.

High-Risk Reconciliations Before Filing

Before signing the audit report, complete these reconciliations:

• Turnover as per books vs GSTR-1 and GSTR-3B
• Revenue vs AIS/TIS/Form 26AS
• TDS payable vs TDS returns filed
• MSME creditors vs. Clause 22 disclosures
• Loans and deposits vs bank statements and party confirmations
• Closing stock vs physical inventory records
• Clause 44: expenditure vs GST purchase register

Investigate every material difference and document the resolution. Material differences should be investigated, appropriately explained and supported by relevant working papers before the audit report is finalised. Generic explanations should not be used as a substitute for proper verification.

Conclusion

The revised Form 3CD for AY 2026–27 demands precise, clause-wise disclosures with strong reconciliations. MSME payments, loan transactions, buyback proceeds, and GST expenditure are key focus areas. Taxpayers and auditors must update their checklists to avoid reporting errors and compliance risks.

How TaxAcumen Can Help

TaxAcumen assists businesses in preparing Form 3CD disclosures, reconciling MSME and loan data, and ensuring accurate tax audit reporting. Get in touch with us for a consultation.

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