Vinu: Hey Manu, I’ve been hearing about Form 3CB and 3CD, and I’m a bit confused. How do I know if these forms are applicable to a firm or a company?

Manu: Good question, Vinu. Forms 3CB and 3CD are part of the tax audit process in India, and whether they are applicable depends on certain criteria, mainly the turnover of the firm or company, and whether they are required to undergo a tax audit under Section 44AB of the Income Tax Act.

Vinu: So, what are the limits for a tax audit to be required?

Manu: There are a few important limits to keep in mind:

For businesses, if the turnover or gross receipts exceed ₹1 crore in a financial year, a tax audit is mandatory.

Vinu: Ah, so there’s a ₹10 crore limit if cash transactions are minimal? That’s interesting. But how do Form 3CB and 3CD fit into this tax audit?

Manu: Exactly, Vinu. Now, as for the forms:

Form 3CD is a detailed statement of particulars that the tax auditor files, which provides all the important financial information.

Vinu: I see. But what if the company is already audited under the Companies Act?

Manu: In that case, Vinu, instead of Form 3CB, they file Form 3CA, along with Form 3CD. Form 3CA is used when the entity is already subject to an audit under other laws like the Companies Act. So, a company audited under the Companies Act would submit Forms 3CA and 3CD.

Vinu: Got it. So, for businesses not audited under any other law, they'd file both Form 3CB and 3CD?

Manu: Exactly! If there’s no audit required under other laws, they’d need both Form 3CB and 3CD. The main criteria are the turnover thresholds and whether the entity is already being audited for other purposes.

Vinu: That clears things up! So, I just need to check the turnover limits and whether they’re audited elsewhere to know which forms apply.

Manu: You’ve got it, Vinu! Keep those turnover limits in mind—₹1 crore, ₹10 crore, ₹2 crore for presumptive tax, and ₹50 lakh for professionals—and whether the business is subject to other audits. That’ll guide you on whether 3CB or 3CA applies.