Standardised Financial Statements for Non-Corporate Entities: For TRA
FAQ’s on Tax Audit Under Income Tax Act
Table of Contents
Standardised Financial Statements for Non-Corporate Entities: What It Means for Tax Audit Reporting
What has changed?
Until now, only companies had a prescribed format for financial statements under Schedule III to the Companies Act, 2013. Proprietorships, HUFs, partnership firms, AOPs, BOIs and trusts had no mandated format. Their balance sheets and profit and loss accounts followed habit and the preferences of whoever prepared them, so presentation varied widely from one entity to the next. ICAI has now filled that gap with two guidance notes:
- the Guidance Note on Financial Statements of Non-Corporate Entities, and
- a companion Guidance Note on financial statements of limited liability partnerships.
Together they prescribe a standard structure for the balance sheet, statement of profit and loss, notes, and disclosures of entities outside the Companies Act. This brings them close to the discipline that Schedule III imposes on companies.
The tax audit connection with respect to Standardised Financial Statements for Non-Corporate Entities:
The Guidance Note does more than recommend good practice. It is linked directly to the tax audit report. Under the Eleventh Edition of the Guidance Note on Tax Audit under Section 44AB, the tax auditor must check whether the financial statements follow the prescribed format. Any departure must be reported as an observation or qualification:
- in Para 3 of Form No. 3CA, where the accounts are audited under another law, and
- With reference to Para 5 of Form No. 3CB, where the tax audit is the only audit.
This places a disclosure obligation on the auditor. The Guidance Note does not stop an entity from presenting its accounts differently. But a non-compliant presentation can no longer pass silently: it will appear on the face of the audit report filed with the Income Tax Department. For the entity, that can invite questions. For the auditor, failing to report it is a professional lapse.
The implementation timeline of Standardised Financial Statements for non-corporate entities:
The Guidance Notes were first announced for periods beginning on or after 1 April 2024. ICAI later made adoption voluntary for FY 2024-25. At its 451st meeting held on 30–31 March 2026, the Council settled the rollout in two phases:
| Phase | Accounting periods beginning on or after | Entities covered |
|---|---|---|
| Phase I | 1 April 2025 (FY 2025-26) | Non-corporate entities and LLPs with turnover above INR 5 crore |
| Phase II | 1 April 2026 (FY 2026-27) | All remaining non-corporate entities and LLPs, regardless of turnover |
What this means in practice on Standardised Financial Statements for Non-Corporate Entities:
- For FY 2025-26 (audits being finalised now): firms, proprietorships and other non-corporate entities with turnover above INR 5 crore should already have their accounts in the Guidance Note format. Tax auditors must report any departure in Form 3CA or 3CB.
- For FY 2026-27 onwards: every non-corporate entity is covered, including small proprietorships and firms. Accountants and businesses should move their chart of accounts, Tally groupings and year-end templates to the new format now, so that comparatives and notes are ready on time.
Key takeaway -Standardised Financial Statements for Non-Corporate Entities:
Standardised financial statements are no longer optional for non-corporate entities. The link to tax audit reporting gives the Guidance Note real force, because departures must be disclosed by the auditor. Businesses above ₹5 crore turnover must comply for FY 2025-26, and all others from FY 2026-27. Now is the time to prepare.
Need help moving your accounts to the ICAI format or with your tax audit? Rajput Jain & Associates, Chartered Accountants at P-6/90 (2F), Connaught Circus, New Delhi – 110001
+91-98-11-322-785 | ☎️ 9555 555 480 | Email : info@carajput.com | www.carajput.com
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