ICDS (Income Computation and Disclosure Standards) are applicable for the Year ending on 31.03.2017 (Ay 2017‐18)
1. ICDS are applicable to all kinds of taxpayers (resident or non‐resident both) where taxpayers opting of mercantile system of accounting.
2. ICDS are not applicable where taxpayer is an Individual or a HUF and also not required to get accounts audited under section 44AB of Income Tax Act, 1961
3. ICDS are also applicable to the tax payers where taxpayer is computing income chargeable to tax under presumptive basis (Section 44AD, 44AE, 44ADA, 44B, 44BBA of Income Tax Act, 1961)
4. ICDS are applicable where incomes under head Profits and Gains from Business and Profession or Other Sources. 10 ICDS are issued by CBDT vide Notification No. 33, dated March 31, 2015
5. ICDS are applicable beside taxpayers are adopting Ind AS or AS to maintain their books of accounts.
6. ICDS are not applicable for computing income under MAT provisions but applicable for AMT.
7. ICDS are not applicable for maintenance of Books of Accounts or preparing of financial statements. ICDS are only applicable for computing incomes for the purpose of payment of income tax liability.
8. ICDS are not applicable where conflict is existed with Income tax Act or Rules. Henceforth Income Tax Act or Rules will prevail over ICDS
9. ICDS are applicable where conflict is existed with courts judgments and judicial precedents. Henceforth ICDS will prevail over courts judgments and judicial precedents.
10. ICDS are not applicable where sector specific provisions not contained in ICDS i.e no specified ICDS for real estate developers, BOT (Build‐Operate‐Transfer) projects and leases etc.
11. Net effect on incomes due to application of ICDS is to be disclosed in the Return of Incomes. Significant Accounting policy and specific disclosures are also required to disclose in tax audit report (Form 3CD)
12. Assessing Officer is permitted to make best Judgement assessment under section 144 of Income Tax Act, 1961 where incomes are not computed under provisions of ICDS.
13. Accounting Policies
(I) ICDS are not recognizing the concept of prudence
(II) ICDS are not allowing recognition of expected losses or mark‐to market losses unless specifically permitted by ICDS
(III) ICDS are not permitting the concept of materiality
(IV) ICDS are not permitting the changes in accounting policies without reasonable cause
14. Inventories and Investments
(I) ICDS are not permitting the use of standard cost method for computation of cost of inventories
(II) ICDS are covering the Securities held as stock‐in trade at cost or net realizable value whichever is lower
(III) ICDS are permitting to value category wise not ‘each’ individual security
(IV) ICDS are permitting to value at cost where securities not quoted or quoted irregularly.
15. Provisions, Contingent Liabilities and Contingent Assets
(I) ICDS are not permitting recognition of provisions and contingent liabilities until reasonably certain
(II) ICDS are permitting recognition of contingent assets where inflow of economic benefits are reasonably certain.
16. Construction Contracts and Revenue Recognition
(I) ICDS are not permitting accounting under Completed contract method
(II) ICDS are permitting accounting under percentage of completion method
(III) ICDS are not recognitioning of margins during early stage of contract
(IV) ICDS are not recognitioning of expected losses
(V) ICDS are permitting transitional provisions against open contracts as on March 31 2016
(VI) Cumulative revenue and cost as recognized before March 31, 2016 be considered for revenue recognition from transition date
17. Borrowing Costs
(I) ICDS are not defining any minimum period for classification of asset as qualifying asset
(II) ICDS are permitting to capitalise the borrowing costs where asset does not take substantial time to construct
(III) ICDS are not permitting the interest as borrowing cost against exchange differences as arising from foreign currency borrowings
(IV) ICDS are permitting the capitalization where active development of qualifying asset is interrupted
(V) ICDS are not permitting capitalisation of borrowing cost after asset is put to use
(VI) (a) ICDS are not permitting to capitalise the incomes from temporary deployment of unutilised borrowed funds
(b) Henceforth these incomes be taxed in year of earning
18. Effects of Changes in Foreign Exchange Rates
(I) ICDS are permitting the premium or discount be amortised over the life of contract against foreign currency option contracts and other similar contracts
(II) ICDS are permitting the exchange differences on translation of non integral foreign operations as income or expense
19. Additional Set of Books of Accounts under ICDS
(I) ICDS not requiring additional set of books of accounts
(II) ICDS are requiring to prepare additional records and reconciliations to be prepared and kept available for future purpose
20. Expected in Future
(I) ICDS are not considering the Guidance Notes & Accounting Standard Interpretations etc. as issued by ICAI which may impact the
computation of taxable incomes
(II) CBDT has made suitable modifications in Income Tax Return Forms & Form No. 3CD [Clause No. 13(f)] to determine taxable income in accordance to ICDs
21. Disclosure under ICDS
(I) For Each Class of Provision
(a) Brief description of nature of obligation
(b) Carrying amount of provision at beginning and end of period
(c) Additional provisions made in previous year and increase in existing provisions
(d) Amount used against provisions
(e) Amount of provisions reversed during previous year
(f) Amount of expected reimbursement against provisions
(II) For Each Class of Asset
(a) Brief description of nature of asset & related incomes
(b) Carrying amount of asset at beginning and end of previous year
(c) Additional amount of asset & related incomes recognized during the year
(d) Amount of asset and related incomes reversed during previous year