The Central Government had notified 10 “Income Computation and Disclosure Standards” (ICDS) to be applicable with effect from assessment year 2017-18. The main purpose of ICDS is to develop system of computation of income of undermentioned heads under Income Tax Act. So that tax related issues could be minimized.
1. Profits and gains of business or profession – PGBP
2. Income from other sources
* ICDS shall also apply to all persons who follows mercantile system of accounting, except those INDIVIDUAL & HUF who are not covered under tax audit provisions vide Notification no. 87/2016.
* It is applicable to all assesses irrespective of Status of Individual (AOP, Firm, Resident, Non Resident etc.)
Every assesse is required to implement ICDS and potential impact will be considered for computation of Income. Noncompliance of ICDS will result in best judgement assessment by tax authorities.
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 Effect of Changes in Foreign Exchange Rates
ICDS VII – Governments Grants
ICDS VII – Securities
ICDS IX – Borrowing Costs
ICDS X – Provisions, Contingent Liabilities and Contingent Assets
– In case of conflict between the provisions of the Income-Tax Act, 1961 and ICDS, then the provisions of the Income-Tax Act would prevail.
– No need to maintain separate books of accounts for ICDS. It only for income computation.
To achieve aforesaid purposed, Income Tax Rules, Appendix II, FORM NO. 3 CD Part –B Clause 13 amended as follows:
(d) Whether any adjustment is required to be made to the profits or loss for complying with the provisions of income computation and disclosure standards notified under section 145(2)
(e) If answer to (d) above is in the affirmative, give details of such adjustments:
|ICDS No||ICDS NAME||INCREASE IN PROFIT||DECREASE IN PROFIT||NET CHANGE|
|2||Valuation of Inventories|
|5||Tangible Fixed Assets|
|6||The Effect of Changes in Foreign Exchange Rates|
|10||Provisions, Contingent Liabilities and Contingent Assets|