According to economic experts, the COVID-19 stimulus package will help the economy recover from the recession. Small and medium-sized businesses should be able to deduct impairment losses related to COVID. It is still being determined whether a provision for bad and doubtful debts can be claimed as a tax expense in the Income Computation and Disclosure Standards (ICDS) or the IT Act.
The Government of India gives ICDS or Income Computation and Disclosure Standards by granting powers in section 145 of the income tax act in 1961. The primary purpose of ICDS is to decrease the widespread irregularities in accounting computations and authority. The ICDS applies to everyone with any income source.
Income Computation and Disclosure Standards, abbreviated as ICDS, were given out by the Government of India through the powers conferred to it by section 145 of the income tax act, 1961. ICDS is for the computation of income under the ‘Profits and Gains of Business or Profession or ‘Income from Other Sources. The ICDS aims to reduce the prevalent irregularities in accounting computations and governance.
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ICDS applies to all persons unless certain specific statutes are in major focus towards a particular sector (for example, VIIIth ICDS has provisions specifically for certain banking and financial institutions.)
ICDS applies to any income or benefits under the profits/gains that the individual sources through business or profession or income from other sources. Compliance with the standards is a better and easy way to compute the income tax efficiently.
The income tax act allows the assessing officer to assess the following ICDS. Still, in the case of non-compliance, it would be coming through section 144 of the Income Tax Act. The Income Tax act, in any aspect, prevails over the ICDS. But in case of a contradiction between judgement and ICDS, then ICDS prevails. The Ministry of Finance drafted the ICDS, wherein 14 drafts were prepared, out of which the government notified only ten.
Now we shall see the list of ICDS:
- ICDS I – Accounting Policies
- ICDS II – Valuation of Inventories
- ICDS III – Construction Contracts
- ICDS IV – Revenue Recognition
- ICDS V – Tangible Fixed Assets
- ICDS VI – The Effects of Changes in Foreign Exchange Rates
- ICDS VII – Government Grants
- ICDS VIII – Securities
- ICDS IX – Borrowing Costs
- ICDS X – Provisions, Contingent Liabilities and Contingent Assets
ICDS needs to give a detailed explanation of its statutes and examples like Accounting Standards.
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The ICDS was developed using Generally Accepted Accounting Principles (GAAPs) with assistance from the Institute of Chartered Accountants of India. It is in place to simplify the procedure and liability management in India over the taxation regime. The ICDS cannot be used over the books of accounts but for notifying over profits and losses. The ICDS brought a set of notifications, and out of the 14 notifications given out by the government, only ten are officially recognised.
The ICDS was expanded with the help of Generally Accepted Accounting Principles(GAAPs) with the support of the Institute of Chartered Accountants of India. The ICDS will not provide a detailed explanation of statutes. The ICDS brings a set of notifications, out of which the government gives 14 notifications. Right now, only ten are officially recognized.
Conclusion
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