Financial Statement Formats explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Where no law prescribes a format, ICAI's Guidance Notes supply the financial statement formats for non-corporate entities and LLPs — applicable in two phases, from 1 April 2025 for entities above Rs 5 crore turnover and from 1 April 2026 for all entities.
From the ICAI Guidance Note on Tax Audit (Revised 2026), the concluding edition under the Income-tax Act, 1961. The format requirement is an ICAI accounting requirement and does not change with the Act; only the reporting location moves — from Para 3 of Form 3CA / Para 5 of Form 3CB to the corresponding observation paragraph of Form No. 26 under rule 47 of the Income-tax Rules, 2026.
Two situations, two sources of financial statement formats
| Assessee | Where the financial statement formats come from |
|---|---|
| Company, society, charitable trust and similar | The respective law governing the assessee prescribes the form in which financial statements are prepared and presented; those provisions must be complied with |
| Proprietorship, partnership, LLP and similar | Law prescribes no specific format. The financial statement formats come from ICAI's Guidance Note on Financial Statements of Non-Corporate Entities and Guidance Note on Financial Statements of Limited Liability Partnerships |
Paragraph 10.1 also fixes responsibility: maintenance of books and records, and preparation of the financial statements, is the responsibility of the assessee — not of the tax auditor.
The phased applicability
The two Guidance Notes were effective for periods beginning on or after 1 April 2024 where no format was prescribed by law. The Council, at its 451st meeting held on 30 and 31 March 2026, then decided that they apply to non-corporate entities such as proprietorships and partnerships, and to LLPs, in a phased manner:
| Phase | Criteria | Applicable from |
|---|---|---|
| Phase I | Entities whose turnover exceeds Rs 5 crore (FY 2025-26) | Accounting periods beginning on or after 1 April 2025 |
| Phase II | All entities (FY 2026-27) | Accounting periods beginning on or after 1 April 2026 |
Phase I bites on accounting periods beginning on or after 1 April 2025 — that is, the year under audit in the current cycle. A non-corporate entity with turnover above Rs 5 crore that has presented its accounts in its own long-standing format is already non-compliant, and paragraph 10.5 requires the auditor to say so. Phase II removes the turnover filter entirely the following year.
Which entities the Non-Corporate Guidance Note covers
Note 1 to paragraph 10.2 lists them:
- (a) Sole proprietorship firms
- (b) Hindu Undivided Family
- (c) Partnership Firms — both registered and unregistered
- (d) Association of Persons — partnership firms not covered above, Body of Individuals, and Resident Welfare Associations
- (e) Society registered under any law for the time being in force
- (f) Trust, private or public, registered under any law or unregistered
- (g) Statutory Corporations, Autonomous bodies and Authorities
- (h) Any form of organisation engaged fully or partially in any business or professional activities
Item (h) is a sweep-up: an entity type not named in (a) to (g) is still covered if it carries on business or professional activity.
Where the financial statement formats are published
Paragraph 10.3 points to ICAI's Accounting Standards Board site for the illustrative Excel financial statement formats for both Non-Corporate Entities and Limited Liability Partnerships, at asb.icai.org under checklist and format. The Guidance Note does not reproduce the formats in its own text, so the current file has to be downloaded rather than taken from the book.
What the tax auditor must do
- Check whether the financial statements prepared and presented by a non-corporate entity, where law prescribes no format, are prepared in the format prescribed by ICAI for the previous year 2025-26 and onwards (paragraph 10.4).
- Where the applicable financial statement formats are not followed, make an appropriate observation (paragraph 10.5).
- State that observation in Para 3 of Form No. 3CA or Para 5 of Form No. 3CB, as the case may be (paragraph 10.6).
Those two paragraphs — Para 3 of Form 3CA and Para 5 of Form 3CB — are the same places the Guidance Note directs the auditor to record disagreement with the assessee's Form 3CD particulars under paragraph 7.3(d), and the impact of a refusal to produce records under paragraph 13.2. They are the standard home for qualifications in a tax audit report.
Worked example
| Assessee | Turnover FY 2025-26 | Format used | Reporting consequence |
|---|---|---|---|
| Partnership firm | Rs 8.40 crore | Firm's traditional trading and profit and loss account | Phase I applies. Observation required in Para 5 of Form 3CB |
| Partnership firm | Rs 2.10 crore | Firm's traditional format | Phase I does not apply for the year beginning 1 April 2025; it does from 1 April 2026 under Phase II |
| LLP | Rs 6.90 crore | ICAI LLP Guidance Note format | Compliant; no observation |
| Private company | Rs 40 crore | Schedule III, Division I | Governed by the Companies Act, not by these Guidance Notes; report in Form 3CA |
Audit checklist
- Establish first whether any law prescribes the format for this assessee.
- For non-corporate entities and LLPs, test Phase I turnover against Rs 5 crore for FY 2025-26.
- Download the current illustrative financial statement formats from ICAI's Accounting Standards Board site.
- Compare the presented statements line by line against the applicable financial statement formats.
- Where the format is not followed, place the observation in Para 3 of Form 3CA or Para 5 of Form 3CB.
- Record that preparation of the statements is the assessee's responsibility in the engagement letter.
- Plan for Phase II to catch every remaining client from 1 April 2026.
Common mistakes
- Treating the Guidance Note financial statement formats as optional for a Phase I entity.
- Applying them to a company whose format is prescribed by the Companies Act.
- Making the observation in the wrong paragraph of the report.
- Testing the Rs 5 crore turnover against the wrong financial year.
- Assuming the auditor is responsible for preparing the statements in the correct format.