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4. ICDS – Income Computation and Disclosure Standards

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ICDS – Income Computation and

Disclosure Standards
Updated on Aug 16, 2018 - 04:30:04 PM

As per Section 145 of the Income Tax Act, any assessee having taxable income under the
heads “Profits and gains from business or profession” or “Income from Other Sources” has to
compute their taxable income in accordance with cash or mercantile system of accounting.

Furthermore, the section states that the Central Government may notify from time to time if it
is to be followed by any class of taxpayer or in any class of income.

Highlights
A. It is applicable to all taxpayer (corporate/non-corporate or resident/non-resident)
irrespective of the turnover or income

B. It will not have any impact on the minimum alternate tax (MAT) for corporate assessees as
it will be based on the book profits to be determined as per the current applicable AS. It will
only be applicable for computation of income chargeable under the head “Profits and gains of
business or profession” or “Income from other sources”

C. It is applicable only on the computation of the income and not for maintenance of the
books. If there is any conflict, then the Income Tax Act will prevail over ICDS

D. Income Tax Authorities have the power to assess the income on best judgment basis on
non-compliance of ICDS

E. All ICDS (except VII relating to Securities) contains transitional provisions which in
general provide for recognition of outstanding contracts and transactions as on 1st April,
2015 in accordance with it after taking into account income/expenditure/loss already incurred
in the past. There is no ‘grandfathering’ for outstanding contracts or transactions as on 31st
March, 2015
F. It does not provide any explanations or illustrations like AS. It only lays down the
principles to be adopted for computing Income

G. Revenue or Expenses on which there is no ICDS will continue to be governed by existing

AS

List of ICDS notified w.e.f 1st April, 2015

There are few ICDS for which the drafts were circulated
but they have not been notified yet:
1. Events occurring after the end of Previous Year

2. Prior Period Expense

3. Leases

4. Intangible Asset
The ICDS have been derived from the existing AS with specific deviations. However, there
are no explanations and examples given in the ICDS, as given in AS.

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