Master Note for Financial Statements of Non-Corporate Entities in India

1. Preparer’s Note – Additional Precision

Original:

“Other incomes, expenses, and provisions are recognized and measured per the Income-tax Act and ICDS, which may differ from requirements under ICAI Accounting Standards.”

Suggested Revision:

“Revenues, expenditures, provisions, and disclosures are recognized and measured in accordance with the provisions of the Income-tax Act, 1961, and the notified Income Computation and Disclosure Standards (ICDS), including ICDS I to X, where applicable. These treatments may significantly diverge from recognition and measurement principles under ICAI’s Accounting Standards (AS) or Indian Accounting Standards (Ind-AS), especially in areas such as revenue recognition, foreign exchange, and construction contracts.”

This provides better coverage for ICDS-related deviations.

2. Emphasis of Matter – Regulatory Alignment

Original:

“The financial statements have been prepared under a special purpose tax reporting framework, not under the generally accepted accounting principles (GAAP) or full Indian Accounting Standards (Ind-AS)...”

Suggested Addition:

“This basis is considered an acceptable special purpose framework as per SA 800 (Revised): ‘Special Considerations—Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks’ issued by ICAI.”

This aligns with ICAI's SA-800 on SPF audits and strengthens audit defensibility.

3. Scope of Audit – Broader Clarification

You could optionally add:

“Our audit procedures are designed to meet the requirements of Rule 6G of the Income-tax Rules, 1962, and the reporting obligations under Form 3CB and Form 3CD. The audit does not include an examination of compliance with statutory dues or legal provisions outside the scope of the Income-tax Act unless specifically reported in Clause 21 of Form 3CD.”

4. Conclusion – Format & Terminology

Consider:

“Subject to the above, and based on our examination as per the requirements of Section 44AB and the information and explanations provided, we are of the opinion that the books of account and related financial statements present a true and correct view of the taxable financial position of the assessee in accordance with the provisions of the Income-tax Act, 1961 for the year ended [31st March 20XX].”

Add-On Option (If Used in 3CB Report Annexures)

You may add a boxed statement below the Balance Sheet and P&L headers:

“Prepared solely for income-tax reporting purposes in accordance with the special purpose framework described in Note 1, and not intended for general-purpose financial reporting.”

This disclaimer further shields you from non-tax users misreading the statements.

• A Word-format template of this master note for copy-paste into audit files
• A version adapted for a presumptive taxation (Section 44AD/ADA) scenario
• Or a version aligned with ICAI's revised Tax Audit Guidance Note 2024-25 references for Form 3CD-specific clauses