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 ‘Profit and gains of business or profession’ and ‘Income from other sources’. The notification specified that these standards were to be applicable for Previous Year (PY) commencing from 1 April 2015, i.e., Assessment Year (AY) 2016-17 onwards.
Subsequent to notification of ICDS, a number of representations were made by many stakeholders which were examined by an Expert Committee (the Committee) comprising departmental officers and professionals. The Committee has recommended amendments to the notified ICDS as well as issuance of clarifications in respect of certain points raised by the stakeholders.
In light of the above, the MoF, on 6 July 2016, announced that the revision of ICDS and the Tax Audit Report (Form No. 3CD) to ensure compliance with the provisions of ICDS and to capture the disclosures mandated by ICDS. Additionally, MoF announced deferment of ICDS by one year and to be applicable from 1 April 2016 i.e. PY 2016-17 (AY 2017-18), instead of 1 April 2015.
The Central Board of Direct Taxes (CBDT) through its notification No. 87/2016 dated 29 September 2016 notified revised ICDS and repealed its earlier Notification No. 32/2015, dated 31 March 2015. The revised ICDS is applicable to all assessees other than an individual or a Hindu undivided family who is not required to get his/her accounts of the PY audited in accordance with the provisions of Section 44AB of the Income-tax Act, 1961 (IT Act). Such assessees need to follow the mercantile system of accounting, for the purposes of computation of income chargeable to income-tax under the head ‘Profits and gains of business or profession’ or ‘Income from other sources’. The notification shall apply to AY 2017-18 and subsequent AYs. (Emphasis added to changes).
Further, CBDT through its notification No. 88/2016, dated 29 September 2016 has also amended Tax Audit Report Form No. 3CD in the Income-tax Rules, 1962 by inserting a new sub-clause in the Form No. 3CD to provide details of adjustments with respect to ICDS and disclosures as per ICDS.
There are no amendments to three ICDSs relating to accounting policies, government grants and provisions, contingent liabilities and contingent assets. All other ICDS have amendments.
This issue of First Notes aims to highlight the key amendments to those ICDS.
To access the text of the CBDT notification
To access the special edition of our First Notes on the overview of key matters and the implementation of ICDS dated 9 April 2015, please click here.
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