Is new non-corporate financial statement format applicable for all tax audits?

Hi John,

Great question! Here’s a clear take on the new non-corporate financial statement format and its applicability for tax audits, including small audits under section 44AD:

Background:

• ICAI released a Guidance Note on Financial Statements of Non-Corporate Entities (Effective FY 2023-24 onwards), which prescribes a new format for financial statements.

• The new format applies to all non-corporate entities including proprietorships, partnerships, LLPs, AOPs, etc.

Applicability for Tax Audits:

1. Tax Audit under Section 44AB (Regular tax audit):

   • Yes, the new format is applicable for tax audits conducted from FY 2023-24 onwards.

   • The auditor should prepare financial statements as per ICAI Guidance Note, including statement of assets and liabilities and P&L format as prescribed.

2. Audit under Section 44AD (Presumptive Taxation Scheme):

   • Typically, no audit is required if the turnover is below prescribed limits.

   • If audit is required under 44AB due to other conditions, then the new format applies.

   • For small audits (like where only limited audit is done), the CBDT or tax authorities haven’t explicitly relaxed the format.

   • However, practically many professionals continue to use the old format for smaller audits due to ease and acceptance, but ICAI’s stance encourages following the new format universally.

Summary:

What You Should Do:

• For regular tax audits from FY 2023-24, use the new format as per ICAI guidance.

• For smaller audits under 44AD, check client and tax authority acceptance, but prefer to follow new format to be compliant.

• Stay updated with CBDT notifications for any relaxations.