INCOME TAX ACCOUNTING STANDARDS FOR COMPUTATION OF INCOME CHARGEABLE TO INCOME TAX
CBDT notified the ten “income computation and disclosure standards” to be followed by all assessees, following the mercantile system of accounting, for the purposes of computation of income chargeable to income-tax under the head “Profit and gains of business or profession” or “ Income from other sources”.
The Notified Standards are relating to :-
- Standard I relating to accounting policies
- Standard II relating to valuation of inventories
- Standard III relating to construction contracts
- Standard IV relating to revenue recognition
- Standard V relating to tangible fixed assets
- Standard VI relating to the effects of changes in foreign exchange rates
- Standard VII relating to government grants
- Standard VIII relating to securities
- Standard IX relating to borrowing costs
- Standard X relating to provisions, contingent liabilities and contingent assets
However, It is clearly mentioned in Standards that in the case of conflict between the provisions of the Income‐tax Act, 1961 and “Income Computation and Disclosure Standard”, the provisions of the Act shall prevail over the aforesaid standards to the extent of deviation.
Further, aforesaid standards is applicable only for the purpose of computation of income chargeable under the head “PGBP” or “IFOS” and not for the purpose of maintenance of books of accounts.
This notification vide 33/2015 shall come into force with effect from 1st day of April, 2015, and shall accordingly apply to the assessment year 2016-17 and subsequent assessment years.