Arun Jaitley may drop tough tax accounting rules in Budget 2017
AdvertisementFinance Ministry has finally decided to consider India Inc’s pleas to abolish the Income Computation and Disclosure Standards (ICDS). IDCS came into effect from the financial year commencing April 1, 2016 (FY2016-17).
Budget 2017 is also likely to light up the road for transition towards a new accounting year - January to December - instead of the currently prevailing 12-month period starting on April 1 of one year and ending on March 31 of the next calendar year.
According to a report by the Justice Easwar-led committee on I-T simplification, ICDS has drawbacks. In the report, it told about multiple accounting methods - one for the books of accounts (under the Companies Act) and the other for tax purposes (ICDS) create confusion, interpretation issues, and additional compliance burden, which may outweigh any gains to be obtained. It had called for a further study of implications.
“ICDS is not in line with fundamental principles of accounting and taxation, viz: prudence, materiality and accounting of foreseeable losses. In several situations, this results in advancing the recognition of income or deferring recognition of expenses or losses - both of which have a potential tax impact (see table)," Ameet Patel, chairperson of the taxation committee at Bombay Chartered Accountants' Society (BCAS), told ET.
BCAS is one of the many associations that has represented to the government for scrapping of ICDS.
For the purpose of computing advance taxes and also for filing of I-T returns, taxpayers have to adopt ICDS. The due dates of the returns for the FY2016-17 - the first year of application of ICDS - fall in the second half of 2017 onward. These standards apply to all taxpayers who follow the mercantile system of accounting for computing income under the heads 'Profits and gains from business and profession' or 'Income from other sources'.
It is mandatory for
Taxpayers are already facing challenges relating to adoption of ICDS and its abolition will be welcomed.
"Indian Accounting Standards (IndAS), introduced by the ministry of corporate affairs, are already in place for larger listed companies. From April 1, 2017, their ambit will be wider. IndAS is closely aligned to international accounting standards and already serves the objective of real-time disclosure and accounting of income. Thus, there is no plausible reason for introduction of ICDS and adding to the administrative burden of India Inc," Sudhir Kapadia, tax leader at EY India, told ET.
A committee led by former chief economic adviser Shankar Acharya recently submitted its report to the
"With introduction of goods and service tax (GST) later on in the year, it is possible that the new accounting year will come into being from January 2019 and not January 2,” it said.
Popular on BI
- A 29-year-old woman found a mark on her head and was diagnosed with a fungal infection. It turned out to be invasive skin cancer.
- Elon Musk told his 76-year-old dad Errol to 'keep quiet' in a text message after he said he wasn't proud of his son, report says
- JPMorgan CEO Jamie Dimon told wealthy clients there's a chance the US is heading into 'something worse' than a recession, report says
- Nepotism and termite-like corruption dented India : Modi
- Modi lists five pledges to turn India into a developed country in 25 years
- There will be a major shift in the way Indians shop and consume brands
- Modi remembers Nehru and Sarvarkar in his speech today
- Made-in-India gun used for 1st time for ceremonial salute at Red Fort on Independence Day