On 31 March 2015, The Ministry of Finance has issued ten Income Computation and Disclosure Standards (ICDS), operationalising a new framework for computation of taxable income by all assesses. All assesses would be required to adopt these standards for the purposes of computation of taxable income under the heads “Profit and gains of business or profession” and “Income from Other Sources”. These standards are applicable for previous year commencing from 1 April 2015, i.e., Assessment Year 2016-17 onwards.
The notification of these ICDS is quite timely and important, especially considering that the timelines for adoption of Ind AS (IFRS converged standards) have also been notified, which permits voluntary adoption for financial year 2015-16. Providing a tax neutral framework for transition to Ind-AS was a prerequisite for smooth implementation of Ind AS from this year.
The adoption of ICDS will significantly alter the way companies compute their taxable income, as many of the concepts from existing Indian GAAP have been modified. This may also require changes to existing process and systems. This special edition of our First Notes provides an overview of key matters and roadmap for implementation of ICDS, along with our brief comments. The original notification can be downloaded from the link here.
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