Why Acturial gain or loss as per Ind as is considered in Income Tax computation?
This query is : Resolved
08 September 2025
In a Company following Ind As standards, the actuarial loss ( remeasurement of defined benefit plan- gratuity etc.) was shown in Other Comprehensive Income (OCI) section of the Profit & Loss a/c.
(i) Whether the Computation of Total Income ( under Income Tax Act) starts from the Profit for the year , before considering OCI items ?
(ii) whether the oci items are considered in computation of total income ? If yes why ? According to which section or rule ?
(i) Whether the Computation of Total Income ( under Income Tax Act) starts from the Profit for the year , before considering OCI items ?
(ii) whether the oci items are considered in computation of total income ? If yes why ? According to which section or rule ?
08 September 2025
The computation of Total Income under the Income Tax Act starts with the profit as per the Profit & Loss account, but it typically does not include items shown under Other Comprehensive Income (OCI) such as actuarial losses on defined benefit plans (gratuity, etc.) recognized under Ind AS 19.
The starting point for computing total income is the profit as per the Profit & Loss account, before considering OCI items.
OCI items, such as actuarial gains/losses (re-measurement of defined benefit plans), are disclosed separately under Ind AS and do not affect profit and loss.
For income tax computation, there are no explicit provisions to include items credited or debited directly to OCI in total income, except for specific cases under Minimum Alternate Tax (MAT) or Alternate Minimum Tax (AMT).
The starting point for computing total income is the profit as per the Profit & Loss account, before considering OCI items.
OCI items, such as actuarial gains/losses (re-measurement of defined benefit plans), are disclosed separately under Ind AS and do not affect profit and loss.
For income tax computation, there are no explicit provisions to include items credited or debited directly to OCI in total income, except for specific cases under Minimum Alternate Tax (MAT) or Alternate Minimum Tax (AMT).
08 September 2025
Generally, OCI items are not considered in the computation of total income for regular tax computation under the Income Tax Act, since they do not form part of the standard profit and loss statement and are not recognized as income or expense for tax purposes.
Exception: For computation of book profit under MAT for companies governed by Ind AS, certain OCI components can be added back or adjusted if they are not to be reclassified to profit or loss, but this is a special case.
Relevant Sections/Rules
Section 14 of the Income Tax Act defines total income, which is aggregated from the heads of income and generally excludes OCI items.
Section 14A ensures no deduction is allowed for expenditure related to income not forming part of total income, which implies OCI items are outside scope unless tax law specifically includes them.
For companies following Ind AS, the MAT provisions (section 115JB as amended by Finance Acts) prescribe adjustments for OCI in computing book profit, focusing only on amounts not reclassified to P&L.
Ind AS 19 mandates actuarial gains/losses from defined benefit re-measurement to be recognized in OCI and not P&L.
Exception: For computation of book profit under MAT for companies governed by Ind AS, certain OCI components can be added back or adjusted if they are not to be reclassified to profit or loss, but this is a special case.
Relevant Sections/Rules
Section 14 of the Income Tax Act defines total income, which is aggregated from the heads of income and generally excludes OCI items.
Section 14A ensures no deduction is allowed for expenditure related to income not forming part of total income, which implies OCI items are outside scope unless tax law specifically includes them.
For companies following Ind AS, the MAT provisions (section 115JB as amended by Finance Acts) prescribe adjustments for OCI in computing book profit, focusing only on amounts not reclassified to P&L.
Ind AS 19 mandates actuarial gains/losses from defined benefit re-measurement to be recognized in OCI and not P&L.
20 September 2025
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