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Indian Committee Reports On Accounting Standards

by Mary Swire, Tax-News.com, Hong Kong

30 October 2012


A committee set up by the Indian Central Board of Direct Taxes (CBDT) has issued its final recommendations on the accounting standards the government may stipulate that certain classes of businesses follow.

Section 145, subsection 1, of the Indian Income Tax Act provides that income chargeable under the heading of “Profits and gains of business or profession” or “Income from other sources” shall be computed in accordance with either the cash or mercantile system of accounting regularly employed by the assessee. In addition, subsection 2 provides that the Central Government may notify accounting standards for any class of assessees or for any class of income.

In December, 2010, the CBDT set up a committee of departmental officers and professionals to suggest accounting standards for the purposes of notification under Section 145 (2) of the Income Tax Act. An interim report was submitted in August last year, and a discussion paper containing the committee's main recommendations was issued for comment that October.

The final report, submitted in August, recommended that the accounting standards notified under the Act should be made applicable only to the computation of taxable income. It also suggested that a taxpayer should not be required to maintain books of account on the basis of accounting standards notified under the Act. The Committee formulated drafts of accounting standards, termed “Tax Accounting Standards”, to distinguish them from the accounting standards issued by the Institute of Chartered Accountants of India or notified under the Companies Act 1956.

The report is open for comments from stakeholders and the general public until November 26.

TAGS: tax | business | India | law | accounting

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