Income Computation and Disclosure Standard (ICDS) III – Construction Contracts ICDS-III governs the recognition of revenue and costs associated with construction contracts using the Percentage of Completion Method (POCM). As per Section 43CB, profits and gains from construction contracts must be computed using POCM. Scope– ICDS-III applies to all construction contracts, including: Contracts for constructing assets… Read More »

Income Computation and Disclosure Standard (ICDS) II – Valuation of Inventories ICDS-II governs the valuation of inventories for income computation under the head “Profits and Gains of Business or Profession.” As per Section 145A, inventories must be valued at the lower of cost or net realisable value (NRV) in accordance with ICDS. Scope –ICDS-II applies to… Read More »

Income Computation and Disclosure Standard (ICDS) I – Accounting Policies ICDS-I governs the significant accounting policies for computing taxable income under the heads “Profits and Gains of Business or Profession” and “Income from Other Sources.” It does not apply to the maintenance of books of account. In case of a conflict with the provisions of… Read More »

Income Computation and Disclosure Standards (ICDS) Introduction The Central Board of Direct Taxes (CBDT) has notified Income Computation and Disclosure Standards (ICDS) under Section 145(2) of the Income-tax Act, 1961, to ensure uniformity in tax computation and reduce litigation. ICDS is relevant only for tax computation, not for maintaining books of accounts. Applicability ICDS applies to all… Read More »

Alternate Minimum Tax (AMT) Introduction Alternate Minimum Tax (AMT) is a mechanism to ensure that certain taxpayers claiming large deductions still pay a minimum amount of tax. AMT is applicable to non-company assessees whose regular tax liability on total income is less than 18.5% (9% for IFSC units and 15% for co-operative societies) of their… Read More »

MAT Credit MAT credit arises when a company’s tax liability under Minimum Alternate Tax (MAT) exceeds the tax liability under normal provisions of the Income-tax Act. The excess amount is treated as MAT credit, which can be carried forward for up to 15 assessment years and adjusted against future tax liabilities under normal provisions. Key… Read More »

MAT Computation for Ind as Compliant Companies Ind AS-compliant companies calculate book profit for MAT as per Section 115JB, adjusted by specified additions and deletions. These adjustments account for items included in the Statement of Profit and Loss and Other Comprehensive Income (OCI). Key Adjustments for Book Profit Calculation a)OCI Items Not Reclassified to Profit or… Read More »

Calculation of Book Profit for MAT Book profit for MAT is determined by adjusting net profit as per the statement of profit and loss in accordance with the Companies Act, by making specified additions (positive adjustments) and deletions (negative adjustments). Positive Adjustments The following items, if debited to the statement of profit and loss, must… Read More »

Minimum Alternate Tax (MAT) Introduction MAT ensures that companies pay a minimum amount of tax if their tax liability under normal provisions of the Income-tax Act is less than 15% of their book profit. This tax is applicable even if a company reports nil income or has tax losses. Applicability MAT applies to all companies,… Read More »