MCA Amends AS-22: Companies Exempted from Recognising Deferred Tax on Pillar Two Taxes [Read Order]

The Ministry of Corporate Affairs (MCA), through Notification No. G.S.R. 169(E) dated March 10, 2026, has notified the Companies (Accounting Standards) Amendment Rules, 2026, amending Accounting Standard (AS)-22 on Accounting for Taxes on Income under the Companies (Accounting Standards) Rules, 2021.

The notification introduces provisions relating to the OECD’s Pillar Two global minimum tax framework and modifies disclosure requirements for companies.

The amendment inserts a new Paragraph 2A in AS-22, providing that the standard shall apply to taxes arising from legislation enacted to implement the OECD Pillar Two Model Rules, including qualified domestic minimum top-up taxes. However, as an exception to the usual requirements under AS-22, enterprises shall neither recognise nor disclose deferred tax assets and liabilities related to Pillar Two income taxes.

The notification also introduces new disclosure provisions under Paragraphs 32A to 32D. Companies are required to disclose that they have applied the exception relating to deferred tax recognition and must separately disclose the current tax expense or income related to Pillar Two income taxes.

Where Pillar Two legislation has been enacted or substantively enacted but is not yet effective, enterprises must provide information that helps financial statement users understand their exposure to such taxes.

To meet this disclosure objective, companies may provide both qualitative and quantitative information, including details on how the legislation affects them, the jurisdictions where exposure may arise, and an indication of the proportion of profits that could be subject to Pillar Two income taxes or the potential change in the effective tax rate.

The notification clarifies that small and medium-sized companies are not required to comply with the enhanced disclosure requirements relating to exposure to Pillar Two taxes.

According to the notification, Paragraphs 2A and 32A will apply immediately and retrospectively, while Paragraphs 32B to 32D will apply to annual reporting periods beginning on or after April 1, 2025.

Companies are not required to provide the disclosures mandated under these provisions for interim periods ending on or before March 31, 2026.

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