Form 3CD Clause 42 for AY 2026-27: Form 61A, SFT Reporting & Reconciliation

Direct answer

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. Transfer-pricing Form 3CEB remains separate. Official Income Tax Department announcement.

For AY 2026-27 (FY 2025-26), Clause 42 of Form 3CD requires the tax auditor to identify whether the assessee was required to furnish Form 61, Form 61A or Form 61B, whether the required statement was furnished by its due date, and whether all reportable details were actually included. If required details were omitted, Clause 42(b) requires those omissions to be reported in the tax audit report. For many businesses, the practical risk area is Form 61A — the Statement of Financial Transactions (SFT) under section 285BA read with Rule 114E.

For FY 2025-26 / AY 2026-27, tax audit continues under the Income-tax Act, 1961 using Form 3CA or 3CB with Form 3CD. The ordinary tax-audit report due date is 21 October 2026.

1. What does Clause 42 of Form 3CD require?

Clause 42 is not merely a yes/no disclosure. The auditor must first determine whether the assessee falls within any filing obligation for Form 61, 61A or 61B. Where an obligation exists, the audit file should establish:

• which form and reporting obligation applied

• the statutory due date and actual filing date

• whether the statement was filed with all required reportable transactions

• whether any item that should have been reported was omitted or inaccurately captured

• whether corrective action was taken before the tax audit report was finalised

The Income Tax Department’s current tax-audit material expressly states that Clause 42(a) asks whether Form 61, Form 61A or Form 61B was required and whether it was furnished by the due date; Clause 42(b) captures required details not included in the filed statements.

2. Why Form 61A matters most for many tax-audit clients

Form 61A is the Statement of Financial Transactions under section 285BA(1) and Rule 114E. It is designed to give the Department structured information on specified high-value transactions. The Department states that the annual SFT is generally due by 31 May immediately following the financial year in which the transaction is registered or recorded.

Rule 114E identifies different reporting persons and transaction thresholds. This means a company, bank, authorised dealer, mutual fund, sub-registrar and a person subject to tax audit may face different SFT obligations. The test should therefore be entity-specific and transaction-specific rather than based on a generic “high-value transaction” checklist.

3. The key Rule 114E check for persons subject to tax audit

One especially relevant Rule 114E category for businesses subject to tax audit is cash receipt for sale of goods or services. Where the prescribed transaction condition is met, a person liable to tax audit can become a Form 61A reporting person. The audit team should not wait until year-end to discover this obligation. Cash-sale and receipt ledgers should be screened during the year and again before SFT filing.

Important: Section 269ST and Rule 114E serve different purposes. A transaction may raise SFT-reporting questions even when the compliance analysis under cash-receipt restriction provisions is being handled separately. Treat the two controls as linked, but not interchangeable.

4. Clause 42 reconciliation workflow for AY 2026-27

1. Map the assessee’s legal status and activities to the reporting-person categories in Rule 114E.

2. Identify all ledgers and systems that can generate reportable transactions — cash receipts, securities, deposits, foreign-exchange activity, property transactions and other relevant streams.

3. Reconcile the transaction population with the Form 61A statement actually uploaded to the Reporting Portal.

4. Check PAN, transaction value, date, aggregation logic and joint-holder attribution where applicable.

5. Match the filed statement acknowledgement and ITDREIN to the correct entity and reporting period.

6. Prepare an exception list of transactions that should have been reported but were missed or reported inaccurately.

7. Where correction is required, document the corrective filing and retain the revised acknowledgement before signing Form 3CD.

8. Tie the final exception memo to Clause 42(b) so that the tax audit report is consistent with the underlying SFT record.

5. Practical example

Assume an audited business identifies several large cash receipts in its sales ledger during FY 2025-26. The finance team filed Form 61A by 31 May 2026, but one qualifying transaction was omitted because the customer account had been coded to a miscellaneous ledger. A clean Clause 42 process would not stop at “Form 61A filed — Yes.” The audit team should reconcile the source ledger to the filed SFT, identify the missing transaction, evaluate and complete the correction process where required, and preserve the correction evidence. If a required detail remains omitted, Clause 42(b) becomes relevant.

6. Consequences of weak SFT compliance

The compliance exposure extends beyond a tax-audit disclosure. The Income Tax Department states that failure to furnish an SFT can attract penalty under section 271FA at ₹500 per day of default. If the statement is still not furnished within the time specified in a notice under section 285BA(5), the penalty can rise to ₹1,000 per day after that notice period expires. Inaccurate SFT reporting can also trigger separate consequences under section 271FAA in applicable cases.

For a tax-audit client, this is why Clause 42 should be treated as a data-reconciliation control rather than a form-filling exercise. A “filed” Form 61A can still create audit and assessment risk if the underlying transaction population is incomplete.

7. Pre-filing checklist for finance teams and tax auditors

• Confirm whether Form 61, 61A or 61B applies

• Check Form 61A due date and acknowledgement

• Verify ITDREIN and principal-officer details

• Reconcile reportable transaction populations to source ledgers

• Review aggregation rules and transaction thresholds

• Test PAN and counterparty master data

• Identify omissions and corrections

• Document Clause 42(b) exceptions

• Retain portal acknowledgements and correction records

• Cross-check the final Form 3CD with the reporting file

8. Common Clause 42 mistakes

• Treating filing of Form 61A as proof that every required transaction was reported

• Reviewing only the general ledger and ignoring operational systems or sub-ledgers

• Confusing Section 269ST cash-receipt controls with SFT reporting thresholds

• Missing correction statements after identifying data errors

• Failing to document why the assessee was not a reporting person for a particular SFT category

• Signing Form 3CD before the SFT exception list is closed

9. FAQs

Is Form 61A required for every person subject to tax audit?

No. Tax-audit status can make a person a reporting person for specified Rule 114E transactions, but the actual filing obligation depends on whether the prescribed transaction conditions are met. Other SFT categories apply to other specified reporting persons.

What is the ordinary due date for annual Form 61A?

The Income Tax Department states that the annual SFT is generally furnished on or before 31 May immediately following the financial year in which the transaction is registered or recorded. Special reporting streams can have separate frequency rules.

If Form 61A was filed on time, is Clause 42 complete?

Not necessarily. Clause 42 also requires attention to whether all required details were included. A timely but incomplete SFT can still produce a Clause 42(b) reporting issue and may require correction.

Does AY 2026-27 use Form 3CD or the new Form 26?

AY 2026-27 (FY 2025-26) continues to use the existing Forms 3CA/3CB with Form 3CD under the 1961 Act. The unified Form 26 applies to Tax Year 2026-27 under the Income Tax Act, 2025.

10. Related PGT & Associates guides

For the broader audit framework, read Tax Audit for AY 2026-27: Thresholds, Forms 3CA/3CB-3CD & 30 September Deadline.

For form selection, see Form 3CA vs 3CB vs 3CD for AY 2026-27.

For a wider pre-filing review, see Form 3CD Common Mistakes for AY 2026-27.

11. Primary references

Income Tax Department — Items reportable in the Tax Audit Report (Clause 42): official tax-audit reference

Income Tax Department — Form 61A / Section 285BA / Rule 114E: Form 61A guidance

Income Tax Department — SFT filing guide and consequences: SFT guidance

Need a Clause 42 / SFT readiness review?

PGT & Associates assists businesses and professional teams with tax-audit readiness, Form 3CD reconciliations, SFT/Form 61A reviews and documentation of reporting exceptions. A focused pre-filing review can reduce avoidable mismatches between statutory statements, accounting records and the final tax audit report.

For professional assistance, visit PGT & Associates or use the website contact page.

Disclaimer: This article is for general professional information and does not constitute legal, tax or audit advice. Applicability depends on the facts, transaction type, reporting-person status and law in force. Review the current statute, rules, forms and portal guidance before filing.