Budget 2026: ICDS to Be Merged with Ind-AS, Separate Accounting Scrapped [Read Finance Bill 2026]

The Union Budget for the Financial Year 2026–27 was presented by Finance Minister Nirmala Sitharaman in the Lok Sabha today (Sunday, 1 February 2026), with the Government announcing a major reform in tax accounting aimed at easing compliance and reducing duplication for businesses.

The Finance Minister proposed the constitution of a joint committee of the Ministry of Corporate Affairs (MCA) and the Central Board of Direct Taxes (CBDT) to integrate the Income Computation and Disclosure Standards (ICDS) into the Indian Accounting Standards (Ind-AS) framework. This move is intended to align tax computation more closely with financial reporting.

As a result of the proposed integration, separate accounting requirements under ICDS will be scrapped from the tax year 2027–28, eliminating the need for companies to maintain parallel records for financial reporting and tax purposes. Sitharaman said the change would significantly simplify tax compliance and reduce the administrative burden on businesses.

Currently, ICDS applies to the computation of taxable income under the Income Tax Act, while Ind-AS governs financial reporting, leading to differences that often require additional reconciliations and disclosures. Industry bodies and tax professionals have long flagged this dual framework as a source of complexity, increased compliance costs and frequent disputes with tax authorities.

The move is also expected to support the growth of homegrown accounting and advisory firms, as simplified standards reduce reliance on complex reconciliations and specialised compliance processes. Smaller companies and professional firms are likely to benefit the most from the reduced compliance load.

The announcement signals the government’s broader intent under Budget 2026 to rationalise tax laws, promote ease of doing business and move towards a more predictable and taxpayer-friendly regime. While the changes will take effect from 2027–28, businesses are expected to closely track the committee’s recommendations to prepare for the transition.

The ICDS–Ind-AS integration forms part of a wider set of reforms announced in the Budget to simplify taxation, reduce procedural friction and improve India’s attractiveness as an investment destination.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates