Form 3CD Clause 24 for AY 2026-27: Deemed Profits & Clawback Reconciliation

Direct answer: For AY 2026-27, Clause 24 of Form 3CD requires a tax auditor to report amounts deemed to be profits and gains under sections 32AC, 32AD, 33AB, 33ABA and 33AC of the Income-tax Act, 1961. The practical audit task is not merely to copy the profit and loss account: it is to identify earlier deductions or investment-linked benefits whose conditions have subsequently failed, trace the triggering event, quantify the deemed income and reconcile it with the return computation.

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. Section 92E / Form 3CEB cases follow a separate timetable. Official Income Tax Department announcement.

Why Clause 24 matters in AY 2026-27

FY 2025-26 remains an old-Act tax-audit year. The Income Tax Department has confirmed that the audit report for FY 2025-26 / AY 2026-27 must continue to be filed in Form 3CA or 3CB together with Form 3CD under the Income-tax Act, 1961. For ordinary audit cases, the report is generally due by 21 October 2026. From Tax Year 2026-27 onward, the new Income Tax Act, 2025 uses unified Form 26 instead.

What Clause 24 asks the auditor to report

Clause 24 is a deemed-income disclosure. It focuses on amounts that become taxable because a taxpayer who earlier obtained a specified deduction or benefit later triggers a statutory clawback. The clause therefore requires a historical audit trail: identify the original deduction, the asset or reserve connected with it, the subsequent event, the relevant section and the amount that becomes taxable in FY 2025-26.

Sections commonly mapped to Clause 24

The clause refers to sections 32AC, 32AD, 33AB, 33ABA and 33AC. Depending on the taxpayer and the history of the claim, these provisions can involve investment-linked deductions or special reserve/deposit mechanisms. Some of these provisions may no longer generate fresh deductions for many taxpayers, but legacy claims can still matter when an asset is transferred, a reserve is misapplied or another statutory condition is breached.

A practical reconciliation framework

Start with the prior-year tax computation and fixed-asset or reserve schedules. Build a register of deductions historically claimed under the sections covered by Clause 24. Then scan FY 2025-26 for disposals, transfers, withdrawals, utilisation changes, business reorganisations and other events that could activate a clawback. For each item, retain the original claim year, amount claimed, relevant asset or account, date and nature of the triggering event, statutory provision, amount recognised in the books and amount offered in the return.

Worked example

Assume a business had obtained an eligible investment-linked deduction in an earlier year and the underlying asset is transferred during FY 2025-26 within a statutory restriction period. The auditor should not stop at recording the sale proceeds or book profit. The prior deduction file should be reviewed to determine whether the transfer causes an amount to be deemed business income. Any resulting deemed amount should be separately reconciled with the tax computation and disclosed under Clause 24 where applicable.

Five common Clause 24 errors

1. Reviewing only the current-year ledger and missing a clawback linked to an old deduction. 2. Treating an asset disposal as only a capital-gains or depreciation issue without testing the original incentive conditions. 3. Failing to reconcile reserve or deposit withdrawals with their permitted use. 4. Reporting a book credit without checking whether the statutory deemed-income amount differs. 5. Assuming a provision is irrelevant merely because fresh deductions under it are uncommon today.

Pre-filing checklist for finance teams and tax auditors

Before signing Form 3CD, reconcile prior-year deduction schedules to the current-year fixed-asset register; review sale and transfer documents; examine reserve and designated-account movements; trace exceptional and non-operating income; compare Clause 24 findings with the computation of business income; cross-reference related Form 3CD clauses where the same transaction affects depreciation, capital gains or other disclosures; and retain the calculation and supporting documents in the tax-audit file.

How Clause 24 fits with the wider Form 3CD review

Clause 24 should be reviewed together with the broader Form 3CD reconciliation rather than in isolation. PGT & Associates has separate practical guides on Form 3CD common mistakes, Clause 18 depreciation and WDV reconciliation, and Clause 16 deemed profits under section 41. Those reviews help ensure that one transaction is not omitted merely because it appears in a different ledger or tax schedule.

FAQs

Is Clause 24 only about current-year deductions? No. Its risk often arises from a deduction or benefit claimed in an earlier year whose conditions are breached in the current year. Does a book profit automatically equal the Clause 24 amount? No. The statutory deemed-income computation must be tested independently. Which law applies for AY 2026-27? The Income-tax Act, 1961 and Forms 3CA/3CB with Form 3CD continue to apply to FY 2025-26. What is the ordinary tax-audit report due date? 21 October 2026 for ordinary cases, subject to the applicable return category and any later official extension.

Primary references and professional support

Primary references: Income Tax Department FAQs on the FY 2025-26 tax-audit transition and AY 2026-27 forms; the Income Tax Department Form 3CA-3CD / 3CB-3CD utility and schema; and ICAI Guidance Note on Tax Audit under Section 44AB (Revised 2026). For transaction-specific Clause 24 reviews, PGT & Associates can assist with historical deduction tracing, Form 3CD reconciliation and tax-audit documentation. Contact the firm through the website enquiry page for professional assistance.

Disclaimer: This article is for general professional information and does not constitute legal or tax advice. Applicability depends on the taxpayer’s facts, historical claims, statutory conditions and subsequent amendments or judicial developments.