Income Computation & Disclosure Standards (ICDS) Issued by CBDT under power under section 145(2) of Income Tax Act, 1961 vide notification no. 32/2015, dated 31-3-2015 Purpose: Computation of Income under PGBP head and Income from Other sources head Applicability: All assessee following mercantile accounting system W.e.f. 01/04/2015 i.e. Assessment year 2016-17 ICDS - IX - Borrowing Costs S. No. | Scope of ICDS | Particulars | IX | Borrowing Costs | 1. Scope - Treatment of borrowing costs. | 2. Out of scope - Actual or Imputed cost of owner’s equity and preference share capital. | 3. Terms used - Borrowing Costs: Interest & other costs incurred in borrowing of funds. And also include commitment charges, amortised amount of discounts or premium, amortised amount of ancillary cost incurred for arrangement of borrowings and finance charges. Qualifying Assets: Tangible Assets, Intangible Assets, and Inventories which takes more than 12 months to become saleable. | 4. Recognition - Direct attributable to the acquisition, construction or production of a qualifying assets will be capitalised. Borrowings cost needs to be capitalised will be calculated as per respective ICDS on borrowings cost. Others borrowings cost will be recognised as per the provisions of Income tax act. | 5. Borrowing Cost for Capitalisation - In case of specifically associated with assets, actual borrowings cost incurred will be capitalised. In case of general i.e. borrowings are not for a particular asset it will be capitalised as per formula - A*B/C. Here A means Borrowing cost incurred in previous year, not related to specific assets, B means Average of cost of qualifying assets as on first & last day of previous year, C means Average of cost of total assets as on first & last day of previous year. | 6. Commencement of Capitalisation - In case borrowings related to specific assets, date of fund borrowed will be commencement date. In case of borrowings not related to specific assets, date of fund utilised will be commencement date of capitalisation. In case of tangible & intangible assets, it will be date of put to use of such assets. In case of inventory which requires more than 12 months to be ready for sale, date when substantially all the activities necessary completed will be commencement date of capitalisation. | 7. Disclosure - Accounting policy used for borrowing costs , Amount of borrowing costs capitalised during the previous year. |
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Borrowing costs capitalisation required for qualifying assets; formula provided for general borrowings; disclosure mandated under ICDS IX for tax computation Borrowing costs directly attributable to acquisition, construction or production of qualifying assets must be capitalised; specifically associated borrowings capitalise actual costs, while general borrowings are capitalised using the formula A*B/C (A: general borrowing cost for the year; B: average cost of qualifying assets at period start and end; C: average cost of total assets at those dates). Commencement of capitalisation varies by whether borrowings are specific or general and by asset type. Disclose accounting policy and amount capitalised.
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