In a move to simplify corporate tax compliance, the government may soon form a panel and mandate it to integrate the Income Computation and Disclosure Standards (ICDS) with the Indian Accounting Standards (Ind AS), a senior official told FE.
IndAS, based on International Financial Reporting Standards (IFRS), is globally accepted. Since domestic companies are going global and there’s a need to attract foreign investments, the government decided to align the two standards, officials said. The alignment will likely reduce tax adjustments currently required under ICDS and consequently ease the tax audit reporting, they said.
According to an official, the panel will consist of officials from the Ministry of Corporate Affairs (MCA) and the tax department besides industry professionals. “The panel’s task will be to identify the ICDS that can be aligned with IndAS. Additionally, it will suggest amendments in the relevant laws if some differences remain after aligning the two standards (IndAS and ICDS),” he said.
Harmonising Global Standards
Further, the government is considering providing support to small taxpayers who are not currently part of IndAS. Also, there are plans to introduce transitional provisions to ensure well-ordered convergence with minimum impact on taxpayers.
In the Budget 2026-27 speech, Finance Minister Nirmala Sitharaman said a joint committee will be formed to incorporate the requirements of ICDS into IndAS itself. “Separate accounting requirements based on ICDS will be done away with from the tax year 2027-28,” the FM had said.
Experts said the proposed integration is a meaningful step toward simplifying India’s tax compliance landscape and strengthening the government’s broader objective of promoting ease of doing business. “The budget announcement only states the policy direction but it does not yet prescribe the technical mechanism for integration. The integration is likely to take place through a calibrated modification of certain IndAS principles or by introducing tax-specific clarifications within the standards rather than retaining ICDS as a separate computation framework,” an tax expert said.
To be sure, the ICDS are a set of 10 mandatory accounting standards notified by the government to standardise the computation of taxable income under the Income-tax Act 1961.
Compliance Burden
When IndAS was introduced in FY17, it became applicable to all listed companies and large unlisted companies with a net worth exceeding Rs 250 crore. At the time of introducing IndAS, the Central Board of Direct Taxes (CBDT) prescribed a separate framework – ICDS – for computing taxable income. Designed to operate independently of financial reporting standards to ensure uniformity in tax computation, ICDS became effective from FY17, coinciding with Ind AS implementation.
However, the coexistence of IndAS for financial reporting and ICDS for tax computation created practical challenges for corporates because they must maintain year-end reconciliations, increasing compliance burden. Furthermore, interpretational differences between the two frameworks have also led to disputes during tax assessments.
Source from: https://www.financialexpress.com/money/govt-to-usher-in-new-standards-for-tax-accounting-4164506/
