Tax Audit Clause 26: Track Statutory Dues by Payment Date

Four statutory-dues balances were paid on different dates after year-end. The useful result is a working that explains the facts, the calculation or classification, and the evidence behind the conclusion. This guide shows how to prepare that working and where a reviewer should investigate before accepting the result.

Scope and applicable period

Tax audit for FY 2025–26 / AY 2026–27 using Forms 3CA/3CB and 3CD under the Income-tax Act, 1961. Tax Year 2026–27 uses the new Act and corresponding notified reporting framework, including Form 26.

Verification date: 11 October 2026. Figures and rates identified as assumptions are teaching examples; apply the stated conditions and the actual facts to a real assignment.

The key principle

Clause 26 requires a liability and payment review under Section 43B. Category, year of origin and actual payment dates matter. Some categories have specific conditions and exceptions; do not apply the general return-filing-date approach to every item, particularly the separately treated MSME payment provisions. Employee contributions also need their own statutory analysis rather than being merged with employer contributions.

Worked example

The ₹70,000 payment should be allocated between opening and current liabilities using supporting records. Review whether the opening amount had already been disallowed and whether the current payment creates an eligible deduction. For current items, check the conditions relevant to that particular category. Reconcile disclosure with the tax computation so the same paid opening liability is not claimed twice or omitted from both years.

A practical sequence

Prepare a liability schedule by statutory category and identify the amount, accrual period and actual payment date. Evaluate section 43B conditions, section 43B(h) and employee-contribution treatment separately.

Map the relevant items to Clause 26 and the computation without assuming a single return-filing-date rule applies to every liability. Retain subsequent-payment evidence where the statutory treatment requires it.

A payment entry should be supported by proof that the relevant liability was actually discharged.

Connect the reporting clause with the tax computation

Tax audit reporting is clause-specific. The relevant particulars may include transactions that do not remain in the closing trial balance or amounts presented differently in the financial statements. Keep the ledger population, screening logic, reportable items and proposed tax adjustments as separate stages. A figure disclosed in Form 3CD is not automatically an additional disallowance, and the same item should not be adjusted twice through different workings. Link every material conclusion to the governing provision and the current form field, then reconcile it with the return computation and final report.

Evidence checklist

Keep the following records linked to the same entity, period and working version. Identify missing items explicitly; a checked box should mean the document was examined and supports the stated conclusion.

• Category-wise opening liability register
• Current-year accrual and statutory basis
• Payment dates and statutory challans
• Prior-year disallowance and deduction history
• Clause 26 and computation reconciliation

Common mistakes and how to avoid them

• Applying one payment deadline to every Section 43B category. Compare the conclusion with the category-wise opening liability register and resolve any conflicting facts.
• Ignoring the origin year of a paid balance. Trace the affected item to the payment dates and statutory challans before finalising the working.
• Mixing employee and employer contribution tests. Use the clause 26 and computation reconciliation to make the final position and remaining exceptions clear.

Before you finalise

Recheck the example’s assumptions against the actual assignment, resolve the identified exceptions and make the final figure or conclusion traceable to its source. Preserve the reviewed version and the reason for material changes. For this task, the clause 26 and computation reconciliation should agree with the conclusion presented to the client, reviewer or authority.

Frequently asked question

Can the return due date cure every unpaid liability? No. Category-specific provisions must be applied, including separate rules where the general relaxation does not operate.

Sources and further reading

• CBDT Form 3CD — prescribed particulars, including amendments
• ICAI — Guidance Note on Tax Audit, publication portal
• Income Tax Department — forms and old/new Act transition

Related guide: Form 3cd clause 22 section 43b h msme reporting.