Income Computation and Disclosure Standard (ICDS) VII – Government Grants ICDS-VII governs the recognition, measurement, and treatment of government grants, including subsidies, incentives, duty drawbacks, waivers, concessions, and reimbursements. Scope –ICDS-VII applies to government grants but excludes: Government assistance not classified as grants. Government participation in the ownership of enterprises. Recognition of Government Grants Grants… Read More »

Revenue Account Fluctuations [Section 43AA with ICDS-VI] This ICDS applies to foreign exchange differences on revenue items.  Initial Recognition: Recorded at the rate on the transaction date. The average rate can be used unless the rate fluctuates significantly.  Year-End Translation: ➢ Monetary items: Reinstated using closing rate; differences recognised as income/expense ➢ Non-monetary items: Not restated; continue… Read More »

Income Computation and Disclosure Standard (ICDS) VI – The Effects of Changes in Foreign Exchange Rates ICDS-VI governs the computation of income from foreign currency transactions, translation of financial statements of foreign operations, and accounting for forward exchange contracts. Scope-The standard covers: Treatment of foreign currency transactions Translation of foreign operation financials Forward exchange contracts… Read More »

Income Computation and Disclosure Standard (ICDS) V – Tangible Fixed Assets ICDS-V provides guidance on classification, cost determination, and treatment of tangible fixed assets, including land, buildings, machinery, plant, and furniture, used for business purposes. Classification of Tangible Fixed Assets Assets held for use in the production or supply of goods/services and not for sale… Read More »

Income Computation and Disclosure Standard (ICDS) IV – Revenue Recognition ICDS-IV prescribes the recognition of revenue from the sale of goods, rendering of services, interest, royalties, and dividends. Revenue from construction contracts is governed separately by ICDS-III. Scope– ICDS-IV applies to revenue arising from:  Sale of Goods  Rendering of Services  Use of a Person’s Resources… Read More »

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 »