Schedule ICDS – Effect of Income Computation Disclosure Standards on profit AY 2026-27
‘Schedule ICDS’ in the Income Tax Return (ITR) form captures the impact of Income Computation and Disclosure Standards (ICDS) on the computation of total income.
This schedule helps reconcile the difference between the accounting profit and the taxable profit computed under the Income-tax Act, 1961. It requires the taxpayer to indicate the specific effect of each ICDS provision by showing the amount by which the profit increases or decreases due to adjustments mandated under different standards.
The schedule covers various heads such as Accounting Policies, Valuation of Inventories (excluding certain changes under section 145A), Construction Contracts, Revenue Recognition, Tangible Fixed Assets, Changes in Foreign Exchange Rates, Government Grants, Securities (excluding specific valuation changes), Borrowing Costs, and Provisions or Contingent Liabilities and Assets.
For each head, the taxpayer must report any increase or decrease in profit and then arrive at the net effect. The total effect of ICDS adjustments is computed by aggregating the net impact of all these standards.
Section 145 of the Income-tax Act, 1961.
The CBDT has notified Income Computation and Disclosure Standards (ICDS) for the purpose of computing taxable income. So far, 10 ICDS have been issued, applicable from Assessment Year 2017-18 onwards. These standards apply only for computation of taxable income and not for maintenance of books of account.
Every assessee having income chargeable under the head ‘Profits and Gains of Business or Profession’ or ‘Income from Other Sources’, or both, is required to compute such income in accordance with the notified ICDS. However, the provisions of ICDS are applicable only where the assessee maintains accounts on the mercantile system of accounting.
This schedule applies to ITR-3, ITR-5 & ITR-6