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Income computation and disclosure standards- Introduction and overveiw.
Income computation and disclosure standards- Introduction and overveiw.
Enterprises in India follow accounting standards while preparing books of accounts. These standards suggest the manner of recording an expense or income in the books of accounts. In the same way, ICDS only tell how to compute the taxable income. The persons need not maintain books of accounts as per ICDS. In simple words, it is not required for maintenance of books of accounts but only for income shall be computed for taxation purpose.
The main objective behind the introduction of ICDS was to achieve greater consistency in the computation of income so that tax-related disputes can be minimised.
In case there is a conflict between these standards and Income tax act, then income tax act shall prevail. There is no need to maintain separate books of accounts for ICDS.
Applicability of ICDS.
ICDS is applicable to all assesses following the mercantile system of accounting for computing taxable income either under 'Income from business and profession' or 'Income from other sources' or both (except for Individuals and HUF not covered under tax audit provisions.)
Further, the method prescribed in ICDS for computing taxable income is mandatory else income shall be recomputed by the Assessing officer.
