Govt postpones enforcement of new income disclosure norms by a year2 min read . Updated: 07 Jul 2016, 10:27 AM IST
Income Computation and Disclosure Standards (ICDS) will now be applicable from the current fiscal year as against 2015-16 notified earlier
New Delhi: In a move set to provide respite to India Inc., the government has deferred implementation of the Income Computation and Disclosure Standards (ICDS) by one year.
ICDS will now be applicable from the current fiscal year as against 2015-16 notified earlier.
Further, the tax department will also clarify on sticking points raised by industry over its implementation.
This is in line with recommendations of the R.V. Easwar Committee that had proposed giving Indian companies more time to move to the ICDS regime.
ICDS is a framework that lays down the way taxable income of corporate assessees is computed. But its implementation had raised concerns from industry, especially because of multiple prevalent accounting standards. This was also flagged by the Easwar committee, set up by the government last year to simplify the Income-tax (I-T) Act.
“...multiple accounting methods, one for the books of accounts and another for tax purposes, creates confusion, interpretation issues, multiplicity of records and additional compliance burden which may outweigh the gains to be obtained by the application of ICDS," the committee had observed, highlighting that many of the provisions of ICDS are capable of generating a legal debate about which there is no clarity at present.
It had added that taxpayers are already grappling with regulatory changes brought about by the Companies Act, 2013, Ind AS (Indian Accounting Standards), and the proposed goods and services tax and should be allowed more time to deal with another change of this nature.
As per the existing guidelines, in case of conflict between the provisions of the I-T Act and ICDS, the latter will prevail. There is no clarity on what will happen in case there is a court judgement that is in conflict with the ICDS provisions. The implementation of Ind AS for companies from this year adds to the uncertainty as firms will need to follow one accounting standard to compute the profit and loss account and one for books of accounts to compute taxable income.
Rahul Garg, direct tax leader at PwC India, said deferring ICDS’s implementation is welcome.
“It will be a relief to all companies—both domestic and foreign. However, clarity is still elusive on whether ICDS will overrule existing judgements on taxability of certain items. More clarity is also required in terms of the relationship between ICDS and Ind AS," he said.
In a statement, the Central Board of Direct Taxes said that the tax department is looking at issuing clarifications to address concerns of taxpayers as recommended by the committee.