Understanding the Meaning of ICDS

The full form of ICDS is Income Computation and Disclosure Standards. According to Section 145 of the Income Tax Act, if any assessee who has a taxable income under the heads 'Income from other sources' or 'profits and gains from profession or business', then they have to calculate their taxable income according to the cash or mercantile accounting system.

There are a few ICDS for which drafts were not notified, but they were circulated. Here they are: 

1. Leases
2. Intangible Asset
3. Expense of Prior Period
4. Events happened after the end of the Previous year

The ICDS is being derived from the existing AS, but it has some deviations. There are many examples given in AS, but there are no examples and explanations given in ICDS. 

Key Aspects of ICDS

The key aspects of the ICDS scheme are as follows:

• It is applied to all the taxpayers, including corporate/ non-corporate or resident/ non-resident. It does not depend on the turnover or income of the taxpayer.
• It is only applied to the calculation of the income taxes. It does not apply to the maintenance of books. If there are any conflicts, then the Income Tax Act will take over the ICDS.
• If the ICDS shows non-compliance in any case, then the Income Tax Authorities have the power to assess the case. 
• ICDS does not give any type of explanation like AS. It only provides the principles that are needed to calculate income. 
• If there is no ICDS for any revenue or expenses, then it will continue to be governed by the AS.  

List of ICDS Income Tax

Here is the list of income tax computation and disclosure standards, which are notified under the Income Tax Act: 

• Construction Contracts
• Accounting Policies
• Tangible Fixed Assets
• Government Grants
• Borrowing Costs
• Securities
• Revenue Recognition
• Valuation of Inventories
• Provisions, Contingent Assets and Contingent Liabilities
• The Effects of Changes in Foreign Exchange Rates