Wednesday, August 2, 2023

CBDT Introduces Form 3AF for Claiming Deduction under Section 35D

The Central Board of Direct Taxes (CBDT) has introduced a new form, Form No. 3AF, for claiming a deduction under Section 35D. This provision allows Indian companies or resident individuals to claim deductions for preliminary expenses related to their business.

What's New? The Finance Act 2023 brought about changes to Section 35D, making it mandatory for the taxpayer to furnish a statement containing the particulars of these expenses. This amendment aims to simplify the process and ensure accurate reporting.

Form 3AF - The Key Details Form 3AF is designed to collect the necessary information from the taxpayer. Here's what it requires:

  1. General Information: The form asks for basic details like name, residential status, PAN, TAN, Aadhar number, and address of the taxpayer.

  2. Relevant Previous Year: The taxpayer needs to mention the relevant financial year for which the deduction is being claimed.

  3. Expenditure in Connection with Business Activities: The form requires details of expenses incurred for activities such as feasibility reports, project reports, market surveys, engineering services, and more.

  4. Details of the Person/Company Carrying out the Activity: The name, PAN, and address of the person or company responsible for conducting the business activities need to be mentioned.

  5. Amount of Expenditure: The form asks for the amount spent on these activities, whether paid in cash or through other means.

  6. Tax Deducted at Source: If any tax was deducted at source for these expenses, that information should also be included in the form.

Timeline for Submission Form 3AF must be filed one month before the due date of filing the Income Tax Return (ITR) as specified under Section 139(1). It can be submitted electronically under digital signatures or through an electronic verification code.

Benefits of the New Process This update by the CBDT aims to simplify the process of claiming deductions for preliminary expenses under Section 35D. By introducing Form 3AF, the CBDT ensures that taxpayers provide accurate and comprehensive details about their expenses, which in turn helps streamline the tax filing process.

Claiming deductions for preliminary expenses just got more straightforward with the introduction of Form 3AF.