Income Computation and Disclosure Standards (ICDS)
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In exercise of the powers conferred by section 145 (2) of the Income-Tax Act, 1961, the Central Government hereby notifies the “Income Computation and Disclosure Standards” as Specified in Annexure.
The ICDS is being applicable on all assessees who are following the mercantile system of accounting for the purpose of computation of Income chargeable under the head “PGBP” i.e., Profits and Gains of business or profession or Income under head “Income from other sources”
The pertinent to note that ICDS has certain exception, meaning, these standards are not applicable on following assessees:
- Individual or HUF not required to audit their accounts as per section 44AB of Income-Tax Act, 1961 or
- Persons following cash system of accounting or
- Assessees opting for presumptive taxation under section 44AD or 44ADA or 44AE of said Act.
ICDS are applicable to the assessment year 2017-18 and subsequent years.
Frequently asked question (FAQ’s)
- Whether ICDS prevails over Judgement of Courts? Yes, As per judicial pronouncement in Woodward Governor, ICDS shall over-ride the Judgement of Courts.
- Whether ICDS meant for Maintenance of Books of Accounts? No, ICDS meant for computation of Income under PGBP or Income under head “other sources”. These are not meant for the purpose of maintenance of books of accounts and preparation of financial statements.
- Whether ICDS shall prevail over provisions of the Income-Tax Act, 1961? No, Specific provisions of Income Tax Act shall prevail over general provisions of ICDS
- Whether the provisions of ICDS shall apply to banks, non-banking financial institutions, insurance companies, power companies etc.? Yes, the general provisions of ICDS shall apply to all the persons unless there are sector specific provisions contained in ICDS or in the Act. e.g., ICDS VIII contains specific provisions for banks and certain financial institution as schedule I of the act contains specific provisions for insurance business.
List of ICDS
- ICDS-I- Accounting Policies
- ICDS-II- Valuation of Inventories
- ICDS-III- Construction Contracts
- ICDS-IV- Revenue Recognition
- ICDS-V- Tangible Fixed Assets
- ICDS-VI- The Effects of changes in Foreign Exchange Rates
- ICDS-VII- Government Grants
- ICDS-VIII- Securities
- ICDS-IX- Borrowing Costs
- ICDS- X- Provisions, Contingent Liabilities and Contingent Assets
ICDS v/s MAT (Minimum Alternate Tax)
- MAT under section 115JB of Income-Tax Act, 1961 is computed on net profit as shown in Profit and Loss account as prepared under the Companies Act following Accounting Standards.
- ICDS are applicable only for computation of Income under Normal provisions of Income-Tax Act. Therefore, provisions of ICDS shall not apply for computation of MAT
ICDS v/s AMT (Alternate Minimum Tax)
- AMT under section 115JC is computed on adjusted total income which is derived by making specified adjustments to total income computed as per normal provisions of Income-Tax Act, 1961.
- As AMT computed based upon normal provision of Income-Tax Act, therefore, ICDS shall apply for computation of AMT.
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