The finance ministry Friday notified draft accounting standards to be used for computing taxable income of businesses from April 1, 2015 irrespective of their declared book profits.
According to the draft standards released by the Central Board of Direct Taxes (CBDT), the only tax purpose for which book profits would be used from the next fiscal would be to determine whether a company claiming tax exemptions is liable to pay the 18.5 percent minimum alternate tax (MAT).
Companies not paying the 30 percent corporate tax are liable to pay MAT if their tax liability, excluding tax breaks, falls below 18.5 percent of the book profit.
The new standards are applicable on valuation of inventory, construction contracts, revenue recognition , tangible fixed assets, effects of changes in foreign exchange rates, government grants, securities, borrowing costs, leases, intangible assets, provisions, contingent liabilities and contingent assets.
"The CBDT had constituted a committee comprising departmental officers and professionals in December 2010 to inter alia suggest standards," the finance ministry said in a release here.
"On the basis of the suggestions received from the stakeholders, the draft standards submitted by the committee have been revised," it added.
The proposed Income Tax Computation and Disclosure Standards (ITCD) make it compulsory for tax payers to follow it while calculating income tax liability, which could be different from the Profit and Loss Account prepared as per the Companies Act.
