On 31 March 2015, the Ministry of Finance (MoF) issued 10 Income Computation and Disclosure Standards (ICDS) operationalising a new framework for computation of taxable income by all assessees in relation to their income under the heads ‘Profit and gains of business or profession’ (PGBP) and ‘Income from other sources’. The ICDS are applicable to the specified assessees from Assessment Year (AY) 2017-18.
However, certain changes have been made to them. They are as follows:
- Revised ICDS issued: On 29 September 2016, the Central Board of Direct Taxes (CBDT) notified revised ICDS and repealed its earlier notification no. 32/2015, dated 31 March 2015. These revised ICDS are applicable to all assessees other than an individual or a Hindu undivided family who is not required to get his/her accounts of the Previous Year (PY) audited in accordance with the provisions of Section 44AB of the Income-tax Act, 1961 (IT Act).
- Revised Tax Audit Report (Form No. 3CD): On 29 September 2016, the CBDT also amended Tax Audit Report in Form No. 3CD in the Income-tax Rules, 1962 (IT Rules) and inserted a new sub-clause in the Form No. 3CD to provide details of adjustments with respect to ICDS and disclosures as per ICDS.
- MAT computation formulae for Ind AS companies: The Finance Bill, 2017 introduced on 1 February 2017 proposed a separate formulae for computation of book profit for the companies that prepare financial statements under Ind AS. According to it, Minimum Alternate Tax (MAT) would be calculated using the profits as per the statement of profit and loss before Other Comprehensive Income (OCI) as per Ind AS as the starting point. The Finance Bill, 2017 proposes certain adjustments to book profits for MAT computation. These proposals should be read together with the existing provisions for computation of MAT under Section 115JB of the
IT Act, in particular the adjustments discussed in Explanation 1 to sub-section 2. The proposed adjustments can be grouped into following two categories:
- Adjustments relating to annual Ind AS financial statements
- Adjustments relating to first-time adoption of Ind AS.
The CBDT received a number of queries on various aspects of ICDS. Therefore, on 23 March 2017, CBDT issued clarifications in the form of Frequently Asked Questions (FAQs) on issues relating to the application
This issue of First Notes provides an overview of the responses issued by the CBDT corresponding to the ICDS related issues raised.
To access the text of the FAQs on ICDS issued by CBDT, please click here.