CBDT takes fresh look at tax accounting standards
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Heeding to industry concerns, the income tax department has decided to take a fresh look at the tax accounting standards being implemented from this fiscal, which are primarily aimed at protecting the government’s tax revenue from diverse accounting practices followed by the industry.
The Central Board of Direct Taxes (CBDT) on Thursday called for public comments on the Income Computation and Disclosure Standards (ICDS) for issuing “further clarification or guidance for (its) proper implementation”. Companies were expected to follow these norms while computing advance tax installments but many companies barring the blue chip ones were not fully geared up to adopt these rules this year.
Besides bringing uniformity in the way companies compute their tax liability irrespective of the accounting standards followed in preparing financial statements under the Companies Act for statutory compliance and for shareholder information, ICDS sought to deny the flexibility that businesses had in deferring their tax outgo to a later period. It essentially mandated earlier recognition of revenue in many instances and delayed recognition of certain expenditure.
The CBDT statement is silent on whether the government will insist on companies to pay taxes this fiscal as per the ICDS notified on March 31, 2015, but said further guidance would be given after public consultation till December 15. The apex direct tax policymaking body said an expert committee comprising officers and professionals are looking into the suggestions already received.
Issuing a set of uniform tax accounting standards became necessary as large companies will have to follow a new set of accounting norms called Ind AS from April 1, 2016 for preparing financial statements while the others will continue to go by the existing Indian GAAP issued by accounting rule maker ICAI.
Ind As, which is compliant with the International Financial Reporting Standards followed in over 100 countries, allows mark-to-market valuation of assets and liabilities, which is not allowed in ICDS as taxation is based on historical cost of assets. Indian GAAP, which smaller companies would continue to follow, allows recognition of anticipated losses, but not anticipated gains. ICDS, on the other hand, seeks early recognition of revenue in many areas. (Financial Express)
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