A panel set up by the Central Board of Direct Taxes (CBDT) has proposed new tax accounting standards (TAS) that seek to take away from India Inc the advantage of mark-to-market provisioning for gains or losses on investments in forex derivatives.

The committee's report, put out for public comments on Friday, says a mark-to-market loss or an expected loss shall not be recognised under tax accounting standards, or TAS. These would be accounted for only on realisation.

Lobbying by industry, which is facing huge losses on forex deals, had led to the deferment of the new accounting standard, which would have made it mandatory for Indian companies to disclose their forex losses or gains in their profit and loss statements from the current financial year.

TAS will also prevent companies availing government subsidies from claiming depreciation on assets purchased using the grant. The committee has provided modifications to the ICAI accounting standards dealing with 14 important aspects such as inventories, construction contracts, among others.

"TAS gives out specific guidance removing all ambiguity. These would help reduce litigation in a big way," said Jamil Jamil Khatri, global head of accounting advisory services at KPMG.

Besides looking to tighten screws on tax evasion due to differences in accounting standards and tax laws, the proposed TAS also pave the way for companies to switch over to International Financial Reporting Standards(IFRS).

"Many modifications in the accounting standards are revenue/tax department friendly and have been presented as measures to reduce litigation," said Sunil Jain, partner, J Sagar Associates. The panel has suggested accounts for taxation purposes need to be reconciled with TAS while the books of accounts could be prepared using any standard. Taxpayer will also not be required to maintain separate set of books of account on the basis of these standards.