SKP Tax Alert
Volume 9 Issue 11 | 7 July 2016
Government defers applicability of ICDS by one year

The government announced that the applicability of Income Computation and Disclosure Standards (ICDS), which were effective from 1 April 2015, will be deferred by one year.  ICDS will now become applicable from 1 April 2016.

The ICDS regime had made certain departures from the fundamental accounting principles. This required taxpayers to re-compute their accounting profits to make it compliant with the ICDS requirements.  Furthermore, the interpretation of ICDS had significant ambiguities. The industry at large had made representations to the government seeking clarifications, deferment and even cancellation of ICDS. The government had constituted an Expert Committee to look into these representations. The Expert Committee has now recommended amendments to certain ICDS and the issuance of clarifications in certain cases.

The government is presently evaluating the recommendations of the Expert Committee. It appears that as an interim measure, the applicability of ICDS has been deferred by one year.

It is expected that the government could make amendments to the existing ICDS and issue clarifications on their applicability and interpretation. The government is also evaluating a revision to the Tax Audit Report to incorporate the ICDS requirements and has also indicated that the disclosures required under the ICDS would be covered under the Tax Audit Report.

This may imply that relaxation from ICDS requirements may be provided to small taxpayers who are not subject to Tax Audit. This could cover taxpayers having a turnover from business up to INR 10 million/INR 20 million, or having gross receipts from profession upto INR 2.5 million/INR 5 million.

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