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Income Computation and Disclosure Standards - ICDS   

Section 145(2) of the Income -Tax Act, 1961 confers powers to the Central Government to notify accounting standards to be followed by any class of assessee. Exercising that power, the Central Government introduced ‘Income Computation and Disclosure Standards - [ICDS]’ vide notification dated 31st March, 2015.

As per the notification, the Standards will be applicable from Assessment year 2016-17 to -

  • All the assessees,
  • Following mercantile system of accounting,
  • Computation of income from business or profession,
  • Income from Other sources.

However, on 6th July, 2016, it was decided to defer the applicability of the said standards by a year to 2017-18.

Further, on 29th September, 2016, CBDT re-notified the Income Computation and Disclosure Standards. The new and revised standards will be applicable from assessment year - 2017-18. The CBDT also amended requisite Form No. 3CD suitably to incorporate the changes.  

Exemption from Applicability:

As per the notification, Individual and Hindu Undivided Family who is not required to get his accounts of the previous year audited in accordance with the provisions of Section 44AB of the Income -Tax Act (in other words ‘ Tax Audit Cases’).

Summary of the major changes in revised ICDS:

Sl. No.

                ICDS

Changes

1.

ICDS - I

Accounting Policies

No change

2.

ICDS - II

Valuation of Inventories

Standard Costing method of measurement of inventory has been allowed

3.

ICDS - III

Construction contracts

Transition provision has been changed

4.

ICDS - IV

Revenue Recognition

Revenue recognition from rendering of services in the case of contract with not more than 90 days period can be recognized when completed or substantially completed

5.

ICDS - V

Tangible Fixed Assets

In case jointly held assets, maintenance of separate Fixed Assets register dispensed with

6.

ICDS - VI

Effects of changes in foreign exchange rate

Segregation of integral and non-integral operation has been dispensed with.

7.

ICDS - VII

Government grants

No change

8.

ICDS - VIII

Securities

Included Part B, which deals with securities held by scheduled banks or  public financial institutions, RBI Clarifications etc

9.

ICDS - IX

Borrowing Costs

Period of 12 months or more has been provided for capitalization of borrowings for general borrowings

10.

ICDS - X

Provisions, Contingent liabilities and  contingent assets

No change


Source:

  1. Notification No 87/2016, dated 29th September, 2016
  2. Notification No 86/2016, dated 29th September, 2016
  3. Notification No 33/2015 dated 31st March, 2015

The author is a Tax Law Professional who may be contacted at sritaxandcorporate@gmail.com


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Category Income Tax, Other Articles by - Prabhakar K S 



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