Journal Press India^®

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India’s convergence with International Financial Reporting Standards (IFRS), implemented through the Indian Accounting Standards (Ind AS) framework, has created a structural disconnect between accounting profit and taxable income. This paper examines how three specific IFRS standards — IFRS 9 on financial instruments, IFRS 15 on revenue recognition, and IFRS 16 on leases — generate identifiable fault lines in India’s direct tax base. Using doctrinal and comparative legal research methodology, and drawing on Indian statutes, Central Board of Direct Taxes (CBDT) circulars, and legislative materials from the United Kingdom and Australia, the paper evaluates whether the Income Tax Act, 2025 has rationalised the accounting-taxation divide. The paper finds that the Income Tax Act, 2025 retains the existing Income Computation and Disclosure Standards (ICDS) and Minimum Alternate Tax (MAT) structure without substantive reform. The paper recommends a statutory ‘tax follows Ind AS’ framework, targeted provisions for IFRS 9 and IFRS 16, and a permanent IFRS-tax interface mechanism.

Keywords

IFRS; Ind AS; Direct tax; MAT; ICDS

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CASE LAWS

• CIT v. Sundaram Finance Ltd. (1965). 56 ITR 441 (SC).