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ICDS Amendments in Budget 2018

The ICDS-related proposals in the Finance Bill of 2018 are an aftermath of the Delhi High Court ruling in the case of Chamber of Income-tax Consultant vs. UOI dated 8 November 2017. In this case, the Delhi High Court had raised doubts about the constitutional validity of ICDS

It appears that Finance Bill 2018 intends to put the matter to rest by providing various proposals in this context.

financial planning

ICDS specific proposals in the Finance Bill 2018 are

  • ICDS I: It is proposed to insert section 36(1)(xviii) to provide that mark-to-market losses as computed applying this specific ICDS provision will be available as deduction in the computation of profits and gains of business or profession.
  • ICDS II:It is proposed to amend section 145A to provide:
    • Valuation of inventory will be at cost or Net Realizable value (NRV) whichever is less as computed under this ICDS
    • Valuation of purchase and sale and of inventory will include allied tax, duty, cess or fee which were incurred to bring the goods or services to the place of its location and condition
  • ICDS III:A new section 43CB is proposed to be inserted to provide that the ‘percentage completion method’ is an accepted method to compute the profits arising from specific construction contracts. Further, the contract revenue will include retention money and the contract cost will not be comprised of incidental interest, dividend and capital gains.
  • ICDS-IV:Proposed insertion of new section 145B which will provide that:
    • Interest received on compensation or on enhanced compensation will be deemed to be income of the year of receipt
    • Claims linked to price escalation or export incentives will be deemed to be income of the year in which reasonable certainty about its realization exists.
  • ICDS VI:New section 43AA proposed to be introduced will provide that any foreign exchange gain or loss in respect of specified foreign currency transactions shall be treated as income or loss, if computed according to this ICDS.
  • ICDS-VII:It is proposed to insert a new section 145B to provide that recognition of subsidy or government grants etc. as income will be in the year of receipt, if it is not charged to tax earlier.
  • ICDS-VIII:It is proposed to amend section 145A to further include that:
    • Inventory of unlisted or listed but not quoted securities to be valued at actual cost initially recognized
    • Inventory of category-wise listed securities may be valued at cost or NRV whichever is lower.


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