income computation disclosure standards icds

Income Computation Disclosure Standards (ICDS)

Income Computation Disclosure Standards (ICDS)

Central Board of Direct Taxes has notified 10 income Computation and Disclosure standards to ensure control over disclosure of income of assessee, to bring uniformity in accounting policies governing computation of income in accordance with the tax-related provisions, also reducing irregularities among them. ICDS is not for the purpose of maintenance of books of accounts. These are similar to Accounting standards as per Companies Act, 2013 in major aspects.


The Standards are to be followed by all assessees (other than an individual or a Hindu undivided family who is not required to get his accounts of the previous year audited in accordance with the provisions of section 44AB of the said Act) following the mercantile system of accounting, for the purposes of computation of income chargeable to income-tax under the head “Profits and gains of business or profession” or “Income from other sources”.

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 Changes in Foreign Exchange rates
ICDS VII Government Grants
ICDS VIII Securities
ICDS IX Borrowing costs
ICDS X Provisions, Contingent Liabilities, and Contingent assets



  1. In case of conflict between ICDS and provisions of the Income Tax Act, 1961, the provisions of the Income Tax Act shall prevail.
  2. ICDS will also apply to non-corporate taxpayers who are not required to maintain books of account and/or those who are covered by presumptive scheme of taxation like sections 44AD, 44AE, 44ADA, 44B, 44BB, 44BBA, etc. of the Act. ICDS income tax is applicable to specified persons having income chargeable under the head ‘Profits and gains of business or profession’ or ‘Income from other sources’. Therefore, the relevant provisions of ICDS shall also apply to the persons computing income under the relevant presumptive taxation scheme.
  3. The provisions of ICDS shall not apply for computation of MAT and for computation of AMT.
  4. The term `goods’ has neither been defined in this ICDS nor in the Income-tax Act, 1961. Under section 2(7) of the Sale of Goods Act, 1930, “goods” inter alia means every kind of movable property other than actionable claims and money. Thus, it does not include immovable property. Considering this, a view may be taken that this ICDS will not apply to a dealer in immovable property.
  5. Retention money, being part of overall contract revenue, shall be recognized as revenue subject to reasonable certainty of its ultimate collection condition, as contained in ICDS-III on Construction contracts.
  6. The aggregate cost and NRV of each category of security are compared and the lower of the two is to be taken as carrying value as per ICDS-VIII.
  7. It is clarified that borrowing costs to be considered for capitalization under ICDS IX shall exclude those borrowing costs which are disallowed under specific provisions of the Act. Capitalization of borrowing cost shall apply for that portion of the borrowing cost which is otherwise allowable as a deduction under the Act. Bill discounting charges and other similar charges are covered as borrowing cost. The capitalization of general borrowing costs under ICDS-IX shall be done on an asset-by-asset basis.
  8. As per ICDS recognition of interest shall accrue on the time basis determined by the amount outstanding and the rate applicable.
  9. The provisions of ICDS shall also apply for computation of these incomes on a gross basis for arriving at the amount chargeable to tax.
  10. Under this ICDS, assets for the purpose of rental and administration are not explicitly covered. However, the definition covers assets held with the intention of being used for the purpose of producing or providing goods or services. Accordingly, assets held for administrative purposes shall be considered included in ICDS V.
  11. As compared to the scope under this ICDS, both AS 10 and Ind AS 16 specifically exclude from their scope assets such as biological assets related to agricultural activity other than bearer plants, produce on bearer plants, wasting assets including mineral rights, expenditure on the exploration for and extraction of minerals, oil, natural gas, and similar non-regenerative resources. However, both these Standards include property, plant, and equipment used to develop or maintain such assets.
  12. In cases where, stand-by equipment, servicing equipment or spares are classified as inventory in books, but as per ICDS V, these are required to be recognized as tangible assets, necessary adjustment will have to be done in computing the taxable income.
  13. ‘Forward exchange contract’ as defined under this ICDS means an agreement to exchange different currencies at a forward rate, which is also the definition of this term under AS 11. However, the definition under this ICDS also specifically includes a foreign currency option contract or another financial instrument of a similar nature
  14. The net effect of the above-stated changes shall be disclosed in 3CBCD report.


Non Compliance:

Non Compliance with ICDS can be ground for an assessing officer to complete the

Assessment under “Best Judgment Assessment” under Section 144.

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