India plans major revamp to align tax and financial reporting rules

The Government of India is moving connected a program to bring its abstracted taxation and fiscal reporting regimes nether a azygous framework, concern work Mint reported.

The extremity of the workout is to region 1 of the astir persistent compliance symptom points for companies.

The projected betterment would question to align Indian Accounting Standards (IndAS), which govern firm fiscal statements for investors and shareholders, with the Income Computation and Disclosure Standards (ICDS) utilized for taxation purposes.

If implemented, this would people the astir far-reaching alteration to India’s accounting architecture since IndAS came into unit successful 2016.

At present, the 2 systems are based connected antithetic accounting philosophies.

The taxation accounting standards, oregon ICDS, are issued by the Income Tax Department, portion IndAS is notified by the Ministry of Corporate Affairs.

IndAS is designed to bespeak a company’s economical presumption astatine a peculiar date, drafting connected just worth measurements of assets and liabilities.

Although ICDS does not change publication profits oregon rise the full taxation outgo implicit the agelong term, it does restrict the scope to displacement taxation payments into aboriginal years.

Under IndAS, mark-to-market changes – for lawsuit successful fiscal instruments – are recognised successful the accounts, whereas ICDS mostly relies connected humanities outgo for plus valuation to incorporate fluctuations successful taxable income.

The Ministry of Corporate Affairs and the Central Board of Direct Taxes are present moving to represent a committee to enactment connected integrating the 2 standards, arsenic flagged successful the Union Budget for fiscal twelvemonth 2027 (FY27).

The unified model is acceptable to use from the taxation twelvemonth 2027–28, covering income earned successful FY26–27.

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