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Section 145(2), Central Govt. is empowered to notify ICDS for, applicable from A.Y 2017-18

- Class of Person
- Class of Income

Income Computation and Disclosure Standard (ICDS) and Relevance to income tax

Exception:-

Individual or HUF who is not required to get his accounts audited under section 44AB are not required to comply this ICDS.

Notified ICDS AND Corresponding Accounting Standard and IND AS

Name of ICDS

Corresponding Accounting Standard

Corresponding IND AS

ICDS – 1 Accounting Policy

AS – 1 Disclosure of Accounting Policy

IND AS – 1 Presentation of Financial Statements

ICDS -2 Valuation of Inventory

AS -2 Inventory

IND AS – 2 Inventories Accounting

ICDS -3 Construction Contracts

AS 7 – Construction Contracts

IND AS 115 AND IND AS 11

ICDS -4 Revenue Recognition

AS 9 – Revenue Recognition

IND AS 115 AND IND AS 18

ICDS – 5 Tangible Fixed Asset

AS 10 – Property, Plant and Equipment

IND AS 16 Property, Plant and Equipment

ICDS – 6 Effect of Foreign Exchange Rates

AS 11 – Effect of Foreign Exchange Rate

IND AS 21 - Effect of Foreign Exchange Rate

ICDS – 7 Government Grants

AS -12 Government Grants

IND AS 20 – Government Grant and Assistance

ICDS – 8 Securities

AS 13 -Accounting for Investment

IND AS 40, 109, 105

ICDS – 9 Borrowing Cost

AS – 16 Borrowing Cost

IND AS -23 Borrowing Cost

ICDS – 10 Provision, Contingent Liability and Contingent Asset

AS -29 Provision, Contingent Liability and Contingent Asset

IND AS -37 Provision, Contingent Liability and Contingent Asset

Key Feature:-

1. ICDS applicable for income under head of PGBP or IFOS and not for maintenance of Books of Accounts.

2. In Case of Conflict between ICDS and Provision of Income Tax Act then the provision of Act prevail.

Main Aspect of Difference comparing to Income Tax Provision:-

1. ICDS -1

- ICDS Specifically De-recognized concept of “Prudence and Materiality” in selection of accounting Policy.
- Due to this under ICDS Market to Market Loss or any expected Loss is not allowed unless actually occurred or allowed by other ICDS.

 

2. ICDS -3

- Specifically focused on Percentage of Completion Method for Recognition of Revenue and Cost under Construction Contract.

3. ICDS -6

- In case of Non-Monetary items, Exchange difference arising on conversion shall not be recognized as Income or Expense.

4. ICDS 7

- ICDS allowed recognition of Grant on receipt basis if condition fulfilled, Unlike in AS which allows recognition of Grant on Mercantile basis where there is certainty that grant will received and condition attached complied.

5. ICDS 8

- Allow Subsequent Valuation of Security through Category wise and not for each security as allow in AS.

Like

Security

Price

NRV

Lower of NRV or Cost

Valuation

A

100

90

90

AS

B

100

120

100

AS

Total

200

210

200

ICDS

Note: However it is to be noted that there is no such difference in Accounting Standard and ICDS in case of ICDS 2/4/5/9/10.

 

Major Points for Discussion:

1. ICDS applicable to Non-Corporate assessee covered by Presumptive Taxation.(ICDS 3 and 4)
2. ICDS shall not apply while computation of MAT. How ever it shall apply while computation of AMT.
3. Net effect on income due to application of ICDS is to be disclosed under Return of Income and Tax Audit Report Form 3CD.

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