Recent Updates on Form 3CD under Income Tax Act – July 2025

The Central Board of Direct Taxes (CBDT) has implemented substantial amendments to Form 3CD under the Income Tax Act, effective for the assessment year 2025-26. These updates, notified via the Income-tax (Eighth Amendment) Rules, 2025, reflect an effort to enhance tax transparency, ease compliance, and align reporting obligations with the latest legislative developments.

Key Amendments to Form 3CD Effective April 1, 2025

• Introduction of Section 44BBC (Clause 12): Form 3CD now requires reporting of income under Section 44BBC, covering presumptive taxation for non-resident cruise ship operators and certain broadcasting/telecasting activities. Under this provision, 20% of specified receipts are deemed taxable income, simplifying compliance for affected assessees and ensuring proper disclosure of such income streams.

• Omission of Deductions No Longer Admissible (Clause 19): Sections 32AC, 32AD, 35AC, and 35CCB—which pertained to specific investment-linked deductions and projects—have been removed from the reporting framework, since they are now obsolete or expired. This streamlines the audit process and avoids unnecessary disclosures

• Enhanced Reporting for Payments to Micro and Small Enterprises (Clause 22): Clause 22 has been updated to strengthen the disclosure requirements surrounding payments made to micro or small enterprises, in alignment with Section 43B(h). The change addresses both payment timelines and disallowed interest, mandating clear reporting of non-deductible late payments

• Disclosure of Legal Settlements (Clause 21): Reporting of expenses incurred for settling legal contraventions is now mandatory, improving transparency regarding expenditure related to regulatory or legal violations.

• Overhaul of Loans and Deposits Reporting (Clause 31): Clause 31 now features a dropdown menu and an expanded coding system for categorizing loans and deposits. The form collects granular data on transaction type, nature, amount, and repayment method (cheque, draft, etc.), reducing ambiguity and improving data quality. Errors in these fields now result in failed submissions on the e-filing portal.

• Omission of Clauses 28 & 29: Clauses related to certain TDS defaults and payments to partners have been removed, further simplifying the audit process for CAs and taxpayers.

• New Clause for Share Buyback Reporting (Clause 36B): Introduction of Clause 36B for mandatory reporting of share buybacks under Section 2(22)(f)

Compliance Deadlines and Practical Guidance

• Schema Changes: A total of 71 changes have been recorded across Forms 3CA-3CD and 3CB-3CD. Practitioners must use the latest offline utility for submissions; older versions will be rejected due to schema mismatches.

• Tax Audit Deadline: The due date for filing the tax audit report remains unchanged at September 30, 2025.

• ITR Filing: File the related income tax return by October 31, 2025, after successfully submitting Form 3CD.

• Caution for CAs: Tax auditors are strongly advised to review the schema change document and ensure compliance with the updated requirements, especially when inputting digitally in the e-filing ecosystem.

Conclusion

The 2025 changes to Form 3CD represent a strategic realignment with legislative updates and a drive toward digitized, granular, and transparent tax audit reporting. All practitioners and businesses subject to tax audit should familiarize themselves with the new requirements in detail to ensure a smooth and timely compliance experience in the current assessment cycle