ICAI: Reporting of TDS Payable under Clause 26 of TAR

Clarification on Reporting of TDS Payable under Clause 26 of the Tax Audit Report

As per the Revised Guidance Note on Tax Audit (October 2025 edition) issued by the ICAI, it has now been clarified that TDS Payable is not required to be reported under Clause 26 of Form 3CD of the Tax Audit Report.

Relevant Context

Clause 26 of Form 3CD deals with the reporting of liabilities covered u/s 43B of the Income Tax Act, 1961. Section 43B allows deduction for certain expenses only on actual payment basis, such as Tax, duty, cess, or fee, Employer’s contribution to PF, ESI, etc., Bonus or commission to employees, Interest payable to scheduled banks, Leave encashment, etc.

Clauses Involving TDS Reporting

TDS-related compliance and reporting are already covered through the following specific clauses in Form 3CD:

• Clause 34(a): Auditor reports whether the assessee is required to deduct or collect tax. Furnish details of TAN, relevant sections, nature of payments, total amounts, and taxes deducted or collected.

• Clause 34(c): Requires reporting of interest payable u/s 201(1A) for non-deduction, short deduction, or delayed payment of TDS/TCS. Details of interest payable and actually paid must be provided.

• Clause 21(b): Covers disallowance u/s 40(a)(ia) for expenses where TDS was not deducted or not deposited within due dates. No disallowance is reported if Form 26A certification is obtained from the payee confirming tax payment on such income.

Key Distinction on Clause 26 (Section 43B) vs. TDS Reporting

Earlier Ambiguity on Reporting of TDS Payable

There was uncertainty on whether “TDS payable” (i.e., tax deducted but not yet deposited to the government) should be disclosed under Clause 26 since it represents a statutory liability. However, Institute of Chartered Accountants of India has clarified that TDS payable is not an expense covered under Section 43B. it is merely a statutory obligation to deposit tax deducted, and not a sum claimed as deduction in the profit and loss account.

ICAI Clarification Summary on Reporting of TDS Payable

TDS Payable is not required to be reported under Clause 26, as it does not represent an expense claimed as a deduction. It is merely a statutory obligation to deposit tax deducted on behalf of others. Hence, TDS Payable is a liability under Section 43B, and no disclosure is warranted in Clause 26.

Recent Amendment Note (AY 2025–26)

• As per CBDT corrigendum, delayed payments to Micro and Small Enterprises u/s 43B(h) are no longer reported under Clause 26. Such disallowances are now to be reported under Clause 22 of Form 3CD. Clause 26 reporting applies only to liabilities claimed as deductions in the P&L account.

• TDS Payable does not qualify since It is not debited to P&L as an expense. TDS Payable is excluded from Clause 26 reporting in the Tax Audit Report. All TDS-related disclosures continue to be made under Clauses 34(a), 34(c), and 21(b), as applicable.& It represents an amount collected on behalf of the government. Hence, no reporting of outstanding TDS is required under Clause 26. Revised ICAI guidance ensures clear demarcation between Section 43B liabilities and TDS compliance obligations.

• Auditors are not required to report “TDS Payable” under Clause 26 of Form 3CD in the Tax Audit Report as per the Revised ICAI Guidance Note on Tax Audit (October 2025).