New Delhi, Aug 6 (KNN) As the current tax audit season commences, businesses across the country must familiarise themselves with significant changes to Form 3CD reporting requirements, particularly those affecting Micro, Small, and Medium Enterprises (MSMEs).
The amendments centre on Clause 22 of Form 3CD, introducing enhanced disclosure obligations for MSME-related payments.
Under the revised Section 15 of the MSMED Act, specifically Clause 22(iii), businesses are now required to provide a comprehensive breakdown of all payments made to MSMEs.
The new reporting framework mandates separate disclosure of payments made within the statutory 45-day period and those that exceeded this timeframe.
The updated Clause 22(iii) stipulates that businesses must report the total amount paid to MSMEs during the previous financial year, regardless of payment timing.
This represents a departure from previous requirements where only delayed payments were subject to reporting obligations. Companies must now maintain detailed records of both timely and overdue payments to ensure complete compliance.
The changes carry significant implications for tax deductions and business operations. Under Section 43B(h) of the Income Tax Act, 1961, payments not made within the prescribed timeframe become ineligible for deductions.
This provision emphasises the critical importance of timely payment processing, as businesses risk losing tax benefits for payments that exceed the statutory deadline.
The enhanced reporting requirements reflect the government’s commitment to supporting the MSME sector through improved payment discipline.
By mandating detailed disclosure of payment patterns, the authorities aim to increase transparency and accountability in business-to-business transactions involving smaller enterprises.
The changes underscore the importance of implementing robust internal controls and monitoring mechanisms to track MSME payments effectively.
Businesses should consider updating their accounting systems and establishing clear protocols for timely payment processing to avoid potential compliance issues and financial penalties.
(KNN Bureau)
