Budget to ring in new tax accounting norms
Persons privy to the government’s thinking said modifications to Section 145 of the Income Tax Act to allow calculation of an entity’s taxable income based on TAS without having to maintain two sets of accounts for stakeholders and the tax authorities is expected soon. There could also be a mention of this in Chidambaram’s forthcoming Budget speech.
TAS would have a major impact on tax outgo of companies, especially those in the construction and engineering sectors and banks, in terms of curtailment of freedom in accounting flexibilities. The taxable income of BHEL, L&T and Hindustan Construction, for instance, are set to go up across the board under TAS as it disallows the existing conservative approach allowed under Accounting Standard 3 of recognising revenue from contracts only after their completion if there is an uncertainty in revenue realisation . Under the percentage completion method of recognising revenue proposed in TAS, these companies have to show income as the projects progresses, allowing early taxation of income. BHEL recently reported a 17.5% drop in its net profit for October-December to R1,182 crore on the back of a slowdown in the power sector that prevented it from booking revenue
Be the first to comment.