Income Tax Audit : New changes in TAR for AY 21-22
The time for filing ITR and Audit Reports of prevalent as per the provisions of the Income Tax Act, 1961, is coming soon. In the Audit report many changes are seen especially for the AY-2021-2022; let us understand all in details.
For Income Tax Audit Report, FORM 3CD is used. Central Board of Direct Tax has amended this form by issuing notification, the Notification No. is 28/2021 in G.S.R. 246(E) dated 1.4.2021 by Income-tax (eighth Amendment) Rules, 2021 in order to incorporate the changes brought in the Income Tax Act, 1961 by the Finance Act, 2021.
Following changes are applicable from 01.04.21 in form 3CD-
1. Revised Income Tax Audit Report
As per the new notification now we can revise an already filed Tax Audit Report for recalculation of disallowances under section 40 or section 43B. Earlier, it was not allowed. The revised TAR needs to be filed after it’s verified and signed by a Chartered Accountant.
But, these Revised Tax Audit Reports (TAR) should be filed before the end of the relevant assessment year. Moreover, now Report needs to be filed one month before the due date of filing of return of income u/s 139(1).
As we know, Section 43B allows deduction of certain expenditure on actual payment basis. These expenses are allowed as deduction in the year in which it was incurred provided that the same was paid on or before the due date of filing of return u/s 139(1).
Hence, this used to create inconsistency in the two provisions, as in the tax audit report there is a requirement which needs reporting of disallowable expenses under section 43B for the previous year.
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It happens many a times that our expenditure was incurred in previous year and payment was made before the due date of return but after the filing of the tax audit report that is one month prior to the due date of furnishing the return of income under section 139(1).
After reviewing this, and to remove the inconsistency in these two provisions, it is now allowed to revise the Tax Audit Report to claim the deduction of expenses under section 43B only if the same was disallowed in the original tax audit report.
Note- Time limit to revise TAR: TAR is allowed to be revised for a limited purpose only. A Tax Audit Report is allowed to be revised before the end of the relevant assessment year.
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2. Amendment in Rule 6G:
This prescribes the rules related to reporting of the audit of accounts; those accounts are to be furnished under section 44AB. For allowing filing of revised Tax Audit Report as discussed point 1, Rule 6G is also amended, a new a sub-rule (3) inserted which reads as-
(3) The report of audit furnished under this rule may be revised by the person by getting revised report of audit from an accountant , duly signed and verified by such accountant, and furnish it before the end of the relevant assessment year for which the report pertains, if there is payment by such person after furnishing of report under sub- rule (1) and (2) which necessitates recalculation of disallowance under section 40 or section 43B.
3. Amendment in clause 18-
Amendment of clause 18 relates to amendment in section 32, which states refusal of depreciation on goodwill. The block which has goodwill (Purchased Goodwill) as an asset has to be modified and appearance of depreciation on goodwill in that block at Opening WDV (1.4.2020) shall not be claimed from AY 2021-22. Such value of goodwill will be excluded from the block. In short, WDV of intangible asset will exclude goodwill.
In clause 18, for sub-clauses (ca) and (cb), the following sub-clauses, shall be substituted namely:-
(ca) Adjustment made to the written down value under section 115BAC/115BAD (for assessment year 2021-2022 only).
(cb) Adjustment made to written down value of Intangible asset due to excluding valueof goodwill of a business or profession.
(cc) Adjusted written down value.
4. Amendment in clause 32-
As per the new tax regime of the Income tax act, 1961, the sections 115BAA, 115BAC and 115BAD disallow some specific deductions. Even after this restriction, the option under these provisions are availed then brought forward losses are to be modified to the extent of these restricted disallowed deductions. The same needs to be disclosed in Form 3CD.
5. Amendment in Claue 36
From now onwards no reporting is required in Form 3CD for DDT, as clause requirement of disclosing DDT is removed.
The author of the above article is Sneha Bhalotia.
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