Framework proposed by the MAT-Ind AS Committee

Framework proposed by the MAT-Ind AS Committee

The Ministry of Corporate Affairs (MCA), through its notification dated 16 February 2015, issued a road map for implementation of Ind AS by companies other than banking companies, insurance companies and Non-Banking Financial Companies (NBFCs) in two phases i.e. for accounting periods commencing on 1 April 2016 and 1 April 2017 based on certain prescribed thresholds.

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Background

The Ministry of Corporate Affairs (MCA), through its notification dated 16 February 2015, issued a road map for implementation of Ind AS by companies other than banking companies, insurance companies and Non-Banking Financial Companies (NBFCs) in two phases i.e. for accounting periods commencing on 1 April 2016 and 1 April 2017 based on certain prescribed thresholds. Subsequently, on 18 January 2016 and 30 March 2016, the MCA notified Ind AS road map for banks, insurers and NBFCs.

While adopting the Ind AS, one of the biggest challenges faced by the corporate sector is how this change in financial reporting would impact taxable income. In response, on 31 March 2015, the Ministry of Finance (MOF) issued 10 Income Computation and Disclosure Standards (ICDS), operationalising a new framework for computation of taxable income by all assessees (in relation to their income under the heads ‘Profits and Gains of Business or Profession’ and ‘Income from Other Sources’). While the ICDS are expected to fill some gaps that exist in the current taxation set up by bringing in consistency and clarity in computation of taxable income and providing stability in tax treatments of various items, there is still some uncertainty on the levy of MAT for companies that would compute their book profits under Ind AS.

Therefore, on 8 June 2015, the Central Board of Direct Taxes (CBDT) formed the MAT-Ind AS Committee (the Committee) to suggest a framework for computation of book profit for the purpose of levy of MAT under Section 115JB of the Income-tax Act, 1961 (the IT Act) for Ind AS compliant companies in the year of adoption and thereafter.

New development

On 18 March 2016, the Committee formed by the CBDT issued a report (the report) proposing a framework for computation of book profit for the purposes of levy of MAT under Section 115JB of the IT Act for Ind AS compliant companies in the year of adoption and thereafter.

This issue of IFRS Notes aims to provide the overview of the report.

To access the text of the report notification, please click here.

 

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