Clause 31 of Tax Audit Report: Form 3CD Cash Transaction Rules for AY 2026-27
Updated: Sep 28
Clause 31 of tax audit report is one of the highest-risk Form 3CD reporting areas for businesses that receive, repay or route significant amounts through cash, bearer instruments or non-account-payee modes. For FY 2025-26 / AY 2026-27, tax audit continues under the Income-tax Act, 1961 using Forms 3CA/3CB with Form 3CD, and Clause 31 requires transaction-level reporting linked primarily to sections 269SS, 269ST and 269T. Freshness check: reviewed on 3 September 2026 against current Income Tax Department tax-audit material and the statutory provisions.
Update — 28 September 2026: CBDT changed the specified ordinary AY 2026–27 tax-audit report deadline from 30 September to 21 October 2026 and the related audited return deadline from 31 October to 21 November 2026. The separate Form 3CEB timetable is unchanged. Official Income Tax Department announcement.
Clause 31 of tax audit report: what does it report?
Clause 31 is not a single cash-payment disclosure. It is a set of reporting fields covering specified loans, deposits, advances and high-value receipts/payments. In practical terms, the auditor must identify transactions that cross the statutory thresholds and then report the prescribed counterparty, amount and payment-mode particulars.
• Section 269SS: acceptance of loans, deposits and specified sums relating to transfer of immovable property, generally once the relevant ₹20,000 aggregate tests are met.
• Section 269ST: receipts of ₹2,00,000 or more, subject to its three statutory aggregation tests and exclusions.
• Section 269T: repayment of loans, deposits and specified advances where the statutory ₹20,000 aggregate tests are met.
Why Clause 31 matters for AY 2026-27
The Income Tax Department’s current 2026 tax-audit material specifically identifies Clause 31(a) with section 269SS, Clause 31(b) with specified sums connected to immovable property, Clause 31(ba)/(bb) with section 269ST receipts, Clause 31(bc)/(bd) with corresponding payment-side reporting, and Clause 31(c) onward with repayment reporting under section 269T. This makes Clause 31 a reconciliation exercise across ledgers, bank statements, cash books, property advances and party-wise outstanding balances—not merely a year-end cash-book scan.
Section 269SS: the ₹20,000 test is aggregate, not invoice-by-invoice
Section 269SS generally prohibits taking or accepting a loan, deposit or specified sum through an impermissible mode where any of three tests reaches ₹20,000: the new amount itself; an earlier unpaid balance from the same person; or the combination of the new amount and that unpaid balance. The provision also covers a “specified sum”, meaning money receivable as an advance or otherwise in relation to transfer of immovable property, whether or not the transfer ultimately happens.
This is why a ₹10,000 cash receipt can still become relevant. If ₹15,000 from the same lender is already unpaid, a further ₹10,000 acceptance can take the combined exposure to ₹25,000 and bring the transaction within the statutory restriction. For Clause 31, party-wise aggregation and outstanding-balance testing therefore matter.
The Income Tax Department also notes a higher ₹2,00,000 threshold for specified transactions between a Primary Agricultural Credit Society / Primary Co-operative Agricultural and Rural Development Bank and its member, subject to the statutory conditions.
Section 269ST: three separate ₹2 lakh aggregation tests
Section 269ST is broader than a simple “₹2 lakh cash per day” rule. Subject to its exclusions, a person cannot receive ₹2,00,000 or more through an impermissible mode: (1) in aggregate from a person in a day; (2) in respect of a single transaction; or (3) in respect of transactions relating to one event or occasion from a person.
For audit teams, that means invoice-level testing alone is insufficient. A business may need to aggregate multiple receipts from one customer on the same day, multiple instalments against one transaction, or related receipts tied to one event or occasion.
Section 269T: repayment testing includes interest and aggregate balances
Section 269T restricts repayment of loans, deposits and specified advances through impermissible modes where the amount being repaid together with interest, or the relevant aggregate balances together with interest, is ₹20,000 or more. Specified advance includes money in the nature of an advance relating to transfer of immovable property.
Accordingly, an audit test that looks only at principal can miss a section 269T trigger. The repayment file should capture principal, interest, mode of repayment, counterparty and the aggregate balance position on the repayment date.
Penalty exposure can equal the transaction amount
The reporting risk is significant because the associated penalty provisions are transaction-linked. Section 271D provides for a penalty equal to the loan, deposit or specified sum taken or accepted in contravention of section 269SS. Section 271E provides for a penalty equal to the loan, deposit or specified advance repaid contrary to section 269T. Section 271DA provides for a penalty equal to the receipt that contravenes section 269ST, subject to its statutory protection where good and sufficient reasons are proved.
Clause 31 reporting is therefore not cosmetic disclosure. A mismatch between the books, cash ledger, party ledger and the audit report can expose the taxpayer to a separate penalty process and can also undermine the credibility of the tax-audit file.
A practical Clause 31 reconciliation before filing Form 3CD
• Extract all loan, deposit, unsecured-loan, director/current-account, property-advance and security-deposit ledgers.
• Run party-wise aggregation tests rather than checking only individual vouchers.
• Map every material receipt and repayment to bank, cash, journal and contra entries.
• Identify non-account-payee cheques/drafts separately from account-payee instruments and prescribed electronic modes.
• For section 269ST, test person-per-day, single-transaction and single-event/occasion aggregation.
• For section 269T, include interest and the aggregate balance position on the date of repayment.
• Reconcile related-party/current-account movements and confirm whether entries represent genuine loans/deposits or another commercial transaction.
• Document statutory exceptions separately instead of simply excluding them from the working paper.
• Tie the final Clause 31 schedule back to the trial balance, cash book, bank book and Form 3CD upload data.
Example: why small cash entries can still become reportable
Assume a company has an unpaid loan balance of ₹15,000 from a director. During FY 2025-26 it accepts another ₹10,000 in cash from the same director. Looking only at the new receipt may suggest the amount is below ₹20,000. But section 269SS also considers the existing unpaid balance, taking the combined amount to ₹25,000. The transaction therefore requires careful section 269SS analysis and, where applicable, Clause 31 reporting.
How Clause 31 fits into the wider AY 2026-27 tax-audit file
Clause 31 should be reviewed together with the broader Form 3CD reconciliation checklist, because loan/deposit balances often intersect with related-party disclosures, TDS positions, GST books, bank reconciliations and year-end confirmations.
Businesses that are still determining the correct audit report should also review Form 3CA vs 3CB vs 3CD for AY 2026-27 and the AY 2026-27 tax-audit due-date guide.
Frequently asked questions
Does every cash loan below ₹20,000 fall outside section 269SS?
No. The statutory test also considers earlier unpaid amounts from the same person and the combined aggregate. A new receipt below ₹20,000 can still trigger the provision when the aggregate threshold is reached.
Is section 269ST only a per-day limit?
No. It contains three separate aggregation tests: from a person in a day, for a single transaction, and for transactions relating to one event or occasion from a person.
Does section 269T consider interest?
Yes. The statutory threshold test expressly refers to the loan/deposit/specified advance together with interest, and also to relevant aggregate balances together with interest.
Which tax-audit forms apply for FY 2025-26 / AY 2026-27?
Updated 28 September 2026, the Income Tax Department confirms that FY 2025-26 / AY 2026-27 continues under the Income-tax Act, 1961 tax-audit framework: Form 3CA for persons audited under another law, Form 3CB for other cases, with Form 3CD as the statement of particulars. The ordinary tax-audit report due date is 21 October 2026.
Primary sources
Professional takeaway
For businesses with promoter funding, director current accounts, customer advances, property transactions or frequent cash collections, Clause 31 should be treated as a transaction-risk review, not a form-filling exercise. A clean party-wise reconciliation before the tax-audit report is uploaded can identify exceptions early, preserve supporting evidence and reduce avoidable penalty exposure.
PGT & Associates assists businesses and professionals with tax-audit applicability, Forms 3CA/3CB/3CD, transaction-level reconciliations and review of high-risk Form 3CD clauses.
Disclaimer
This article is for general professional information and does not constitute legal or tax advice. Applicability depends on the facts, statutory exceptions, transaction character and law in force for the relevant period. Obtain case-specific professional advice before taking or omitting any compliance action.
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