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:
- Notification No 87/2016, dated 29th September, 2016
- Notification No 86/2016, dated 29th September, 2016
- 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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