Income Computation and Disclosure Standard (ICDS) VIII – Securities
ICDS-VIII governs the valuation of securities held as stock-in-trade. It does not apply to securities held as capital assets, which are governed by capital gains provisions.
- Scope –ICDS-VIII applies to securities as defined under Section 2(h) of the Securities Contracts (Regulation) Act, 1956, including shares (listed or unlisted), bonds, debentures, government securities, mutual fund units, and rights or interests in securities. It excludes derivatives and does not apply to:
Recognition of interest and dividends (covered under ICDS-IV).
Securities held by insurance companies, banks, public financial institutions, mutual funds, and venture capital funds.
- Valuation of Securities Held as Stock-in-Trade
At the Time of Acquisition
➢ Securities are recorded at actual cost, including purchase price, brokerage, fees, duties, and taxes.
➢ If acquired in exchange, the cost is the fair value of the acquired security.
➢ If acquired as a gift or inheritance, the cost is the original cost to the previous owner.
➢ Pre-acquisition interest on interest-bearing securities must be deducted from the cost.
At the End of the Year (Subsequent Valuation)
➢ Listed Securities: Valued at the lower of cost or net realisable value (NRV).
➢ Unlisted Securities: Valued at cost only (marked-to-market losses are not allowed).
➢ Valuation must be done category-wise (shares, debt securities, convertible securities, etc.), not individually.
Methods of Valuation
➢ Specific Identification Method (preferred).
➢ If impractical, FIFO (First-In-First-Out) or Weighted Average Method may be used.
- Special Provisions for Banks –Scheduled banks and public financial institutions must classify, recognize, and measure securities as per the RBI guidelines. ICDS-VI on foreign exchange does not apply to forward contracts related to securities acquired in foreign currency.
- Tax Treatment of Marked-to-Market Losses
Marked-to-market losses on listed securities (computed as per ICDS) are allowed as a deduction under Section 36(1)(xviii).
If not computed as per ICDS, such losses are disallowed under Section 40A(13).
Marked-to-market gains are taxable as business income under Section 28.
- Disclosures inForm 3CD
Valuation method used for securities.
Category-wise cost and NRV for listed securities.
Any deviation from ICDS and the reasons thereof.