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First Notes

 

First Notes is our ‘hot, off the press’ update that aims to provide a very timely heads up on key accounting and regulatory developments that affect reporting for entities in India. It is one more way for us to connect with you, in addition to the monthly Accounting and Auditing Update.



The Ministry of Finance issues revised drafts on tax computation standards

Currently, the Income-tax Act, 1961 (the Act) notifies two accounting standards: one relating to disclosure of accounting policies and disclosure of prior period and extraordinary items and the other on changes in accounting policies.

The Ministry of Corporate Affairs had earlier announced a roadmap for transition to Indian Accounting Standards (Ind AS) from 1 April 2011. At that time, there was lack of clarity of tax implications on adoption of Ind AS by the companies. Therefore, in December 2010, under the aegis of the Central Board of Direct Taxes (CBDT) a committee was constituted to harmonise the accounting standards issued by the Institute of Chartered Accountants of India with the provisions of the Act.

In August 2012, the committee, after deliberations issued 14 draft accounting standards to be applicable in computation of ‘profits and gains of business or profession’ or ‘income from other sources’ for taxpayers following a mercantile system. These accounting standards are now termed as Income Computation and Disclosure Standards (ICDS).

After the release of the draft ICDS (2012) by the CBDT, concerns were raised by various stakeholders since it had significant differences with generally accepted accounting principles. In order to address some of these concerns, the Ministry of Finance reworked on the standards on 8 January 2015 issued revised drafts of 12 ICDS (2015) for public comments.

Our First Notes provides an overview of key revisions made in the revised draft ICDS (2015). For the text of the revised drafts ICDS (2015) released by the CBDT, please click here.

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