ICDS implementation postponed by Income Tax Department
What's the story
The implementation of the Income Computation and Disclosure Standards (ICDS) was put off for a year by the Finance Ministry. It will now come into effect from 1st April, 2016, as opposed to 1st April, 2015. In a statement, the tax department said, "It has been decided that the ICDS shall be applicable from April 1, 2016.", i.e the current fiscal.
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The Income Computation and Disclosure Standards
The ICDS is a standard of measurement set by the government to calculate a person's income chargeable under the head profits/gains of a business/profession or income from other sources. In the case of a conflict between the Income-Tax Act 1961, and ICDS, provisions of the latter carry more weightage. ICDS cannot be used for the purpose of maintaining books of accounts.
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The Objective of ICDS
The Income Computation and Disclosure Standards were introduced to reduce tax-related disputes. This will happen with greater consistency in the application of accounting principles that govern the computation of income.
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Return of Income
According to the Central Board of Direct Taxes, some taxpayers filed their income returns and received a Tax Audit Report without incorporation of compliance with the ICDS and related disclosures in the absence of the revised Tax Audit Report.
Reasons
Why are the ICDS norms postponed?
Ensuing the ICDS notification sent out on 1st April, 2015, the Central Board of Direct Taxes (CBDT) received representations that sought further clarification of particular provisions. These issues were then referred to an expert committee, the R.V. Easwar Committee, which proposed giving more time to Indian companies. The tax department will also clarify the concerns raised by the industry over the ICDS implementation.
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The confusion
According to a statement released by an expert committee, "Multiple accounting methods, for books of accounts and for tax purposes creates confusion, interpretation issues, multiplicity of records and additional compliance burden which may outweigh the gains to be obtained by the application of ICDS."