FAQs on ICDS Issued by CBDT

Conflict with Judicial precedents:

1. Certain ICDS provisions are inconsistent with judicial precedents. Whether these judicial precedents would prevail over ICDS?

Assessees under Presumptive scheme of taxation:

2. Does ICDS 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?

Conflict with Income-tax provisions:

3. If there is conflict between ICDS and other specific provisions of the Income-tax Rules, 1962 (‘the Rules’) governing taxation of income like rules 9A, 9B etc. of the Rules, which provisions shall prevail?

ICDS provides general principles for computation of income . In case of conflict, if any, between the provisions of Rules and ICDS, the provisions of Rules, which deal with specific circumstances, shall prevail.

Companies Covered under Ind AS:

4. ICDS is framed on the basis of accounting standards notified by Ministry of Corporate Affairs (MCA) vide Notification No. GSR 739(E) dated 7 December, 2006 under section 211 (3C), of erstwhile Companies Act, 1956. However, MCA has notified in February, 2015 a new set of standards called ‘Indian Accounting Standards’ (Ind-AS). How will ICDS apply to companies which adopted Ind-AS?

ICDS shall apply for computation of taxable income under the head “Profit and gains of business or profession” or “Income from other sources” under the Income-tax Act. This is irrespective of the accounting standards adopted by companies i.e. either Accounting Standards or Ind-AS.

Applicability in case of MAT:

5. Whether ICDS shall apply to computation of Minimum Alternate Tax (MAT) under section 115JB of the Act or Alternate Minimum Tax (AMT) under section 115JC of the Act?

MAT under section 115JB of the Act is computed on ‘book profit’ that is net profit as shown in the Profit and Loss Account prepared under the Companies Act subject to certain specified adjustments. Since, the provisions of ICDS are applicable for computation of income under the regular provisions of the Act, the provisions of ICDS shall not apply for computation of MAT. AMT under section 115JC of the Act is computed on adjusted total income which is derived by making specified adjustments to total income which is derived by making specified adjustments to total income computed as per the regular provisions of the Act. Hence, the provisions of ICDS shall apply for computation of MAT.

Applicability to Bank, NBFC, Insurance, Power Sector:

6. Whether the provisions of ICDS shall apply to Banks, Non-banking financial institutions, Insurance companies, Power sector, etc.?

The general provisions of ICDS shall apply to all persons unless there are sector specific provisions contained in the ICDS or the Act. For example, ICDS VIII contains specific provisions for banks and certain financial institutions and Schedule I of the Act contains specific provisions for Insurance business.