Tax dept renotifies income computation, disclosure standards
October, 07th 2016
The tax department has now exempted individuals and HUFs not liable for tax audit from applicability of ICDS, say experts
The income-tax department has renotified the income computation and disclosure standards (ICDS), making changes to provide relief to small taxpayers and service providers and address companies’ concerns over compliance of the norms, especially those related to valuation of inventory.
The ICDS norms were initially notified with effect from financial year 2015-16 but its implementation was deferred by a year to 2016-17 after taxpayers expressed concern over some of the provisions.
Jiger Saiya, partner, direct tax, BDO India, said, “All taxpayers following mercantile system of accounting were required to comply with ICDS while computing taxable income. Coming as a relief to small taxpayers, the tax department has now exempted individuals and HUFs (Hindu undivided families) not liable for tax audit from applicability of ICDS.”
He added that service tax providers have also got a reprieve.
“It is now provided that revenue from service contracts with duration of less than 90 days may be recognised when rendering of services is completed or substantially completed. This will augur well for service providers such as professionals whose engagement contracts span short duration,” he said.
ICDS are a set of 10 standards that will change the way companies calculate income in India.
Its implementation was deferred after a committee formed by the government under retired high court judge R.V. Easwar to simplify tax laws recommended a postponement.
“The introduction of the new ICDS is a welcome step as it addresses some issues voiced by businesses,” said PwC in a note dated 5 October adding that it will help in minimizing litigation involving the tax department and tax payers.
For instance, changes in recognition of revenue for service providers, and introduction of standard cost method for measurement of cost of inventories would provide necessary relief to taxpayers, it said, while adding that some clarifications sought by industry, like clarity on taxability of mark to market gains, have not been addressed.