ICDS delayed by a year, finance ministry confirms

The Ministry of Finance, on Wednesday, notified that the Income Tax Department will now implement Income Computation and Disclosure Standards (ICDS) from April 1, 2016 instead of April 1, 2015. The central government will issue notification for the new amendment shortly.

Now, ICDS will be applicable on the income earned in this fiscal instead of the previous financial year.

"It has been decided that the ICDS shall be applicable from April 1, 2016 i.e. previous- year 2016-17 (Assessment Year 2017-18)," the tax department said in a release.

Confirming the announcement, Revenue Minister, Hasmukh Adhia in his tweet said, "We have decided to implement Income Computation and Disclosure Scheme from AY 17-18 instead of 16-17 in view of some difficulties expressed".

We have decided to implement Income Computation and Disclosure Scheme from AY 17-18 instead of 16-17 in view of some difficulties expressed

— Dr Hasmukh Adhia (@adhia03) July 6, 2016

Clarifying the decision, Adhia also tweeted, "This decision is for Income Computation and Disclosure Standards (ICDS). Not for Income Declaration Scheme. (IDS). No confusion please".

We hope that audit reports will now be ready by CAs in time this year.

— Dr Hasmukh Adhia (@adhia03) July 6, 2016

This decision is for Income Computation and Disclosure Standards (ICDS). Not for Income Declaration Scheme. (IDS). No confusion please.

— Dr Hasmukh Adhia (@adhia03) July 6, 2016

What is ICDS?

As per the official notice by the Income Tax department, ICDS is applicable for computation of income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" and not for the purpose of maintenance of books of accounts.

According to a TaxGuru report, the objective of ICDS was to minimise tax related disputes by bringing consistency in the application of accounting principles governing the computation of income.

Why ICDS will be applicable from current fiscal?

Giving the reason behind the change in the implementation, the Finance Ministry, in the notification said, "Some of the tax payers might have filed their return of income and obtained Tax Audit Report without incorporating the compliance with the ICDS and related disclosures in the absence of the revised Tax Audit Report. Considering these facts, it has been decided that the ICDS shall be applicable from 1.4.2016 i.e. previous year 2016-17 (Assessment Year 2017-18)".

Further, the ministry in a statement said that subsequent to the notification, number of representations were received by the Tax Department which will be examined by an Expert Committee.

Though the revision of ICDS as recommended by the Committee is under consideration."The revision of the Tax Audit Report is also being made for ensuring the compliance with the provisions of ICDS and for capturing the disclosures mandated by the ICDS", the statement added.