“Centre’s New Compliance Requirement”: CBDT Introduces New Form 66 For Determining Book Profit u/s 206(1)

The Central Board of Direct Taxes (CBDT) has notified Form 66, which lays down a format for calculating and reporting the book profit under Section 206(1) of the Income-tax Act, 2025.

The objective behind the introduction of the Form66 lies under the Section 206(1) which pertains to cases where the tax liability is determined on the basis of book profit and not on the taxable income as computed under the normal provisions.

To implement this provision and prevent discrepancies in its application the CBDT has issued Form 66.

Form 66 specifies a standardized, transparent, and verifiable process for calculating book profits with specific additions, deductions and certifications which can be pointed out as follows:

• The calculation of book profits should start with the net profit as shown in the profit and loss account prepared in accordance with the accounting standards.

• Some items such as reserves, unascertained liabilities, and income tax expenses need to be mandatorily added back to calculate the book profit.

• Some permissible deductions such as withdrawals from reserves and depreciation adjustments need to be separately disclosed.

• Form 66 needs to be verified and certified, and the reporting entity will be held responsible for the correctness of the calculations.

• The item-wise disclosure helps to create a clear audit trail, and the tax department can easily verify the calculation of the book profit which increases transparency.

The introduction of Form 66 brings about a transition from free-form computation to rule-based reporting. The entities that come under Section 206(1) will now have to ensure that their accounting information is carefully aligned with the law and that all adjustments are recorded properly.

Although this brings about an increased responsibility for compliance, it also brings about a greater degree of certainty and eliminates any potential disputes that may arise due to differences in the interpretation of book profit.

Form 66 stands out to be an important development in the area of compliance and reiterates the CBDT’s commitment to standardization and transparency in tax reporting. Taxpayers must carefully examine Form 66 and ensure that their internal accounting systems are aligned accordingly.

Overall, the notification is a much-needed development in the area of book profit computation and enhances the integrity of the tax compliance system.

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