By TIOL News Service

NEW DELHI, APR 02, 2015: WHAT was a Draft till March 31 has become a part of legislation. The CBDT has notified the Income Computation and Disclosure Standards (ICDS) yesterday. This clearly puts in place a new framework for computation of taxable income from heads like 'Income from Other Sources' and 'Profit & gains from Business& Profession'. These standards have come into effect for the Current Fiscal 2015-16 and will be applicable for the Assessment Year 2016-17.

These standards provide a tax neutral framework for transition of Indian industry to IFRS standards. Whether one follows the IFRS or the existing Indian Standards, the CBDT has prescribed its own standards for computation of income and has thus ensured horizontal equity in the economy. The aim of the new standards is also to infuse more transparency in the accounting practices by the companies and to avoid litigation.

One senior CBDT official said that ICDS will apply to all taxpayers following the mercantile system of accounting. ICDS also amends many of the concepts of the prevailing Indian GAAP. It also means quicker recognition of profits and also perhaps delayed recognition of expenditure and the same will impact the advance tax liability of the companies.

Although the CBDT's Draft had as many as 12 Standards but it has notified only 10 so far and excluded the two on intangible assets and leases. In some cases where the Income Tax Law itself prescribes certain standards the ICDS has excluded that and in case of a conflict situation the I-T Act provisions will prevail over the ICDS.

With this notificationthe CBDT has fulfilled the promise made by the Union Finance Minister, Mr Arun Jaitley, in his Budget Speech 2014.

(See Full Text of the ICDS Notification)