ICDS- Income Computation and Disclosure Standards

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.)

Non Compliance of ICDS:

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.

Name of ICDS are as under:

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

Important Points Relating to ICDS:

– 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:

1 Accounting Policies
2 Valuation of Inventories
3 Construction Contracts
4 Revenue Recognition
5 Tangible Fixed Assets
6 The Effect of Changes in Foreign Exchange Rates
7 Governments Grants
8 Securities
9 Borrowing Costs
10 Provisions, Contingent Liabilities and Contingent Assets

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