Companies going for Indian accounting standards (IndAS) need not do second round of adjustment for mark-to-market losses on financial instruments in its book profits for the purpose of tax computation, the income tax department has clarified.
This is so because these are already adjusted to book profits under minimum alternate tax (MAT), the Central Board of Direct Taxes (CBDT) said.
However, if there is a reduction in value of assets other than financial instruments through mark-to-market values, the companies will have to adjust those to the book profit.
The CBDT has issued frequently asked questions (FAQs) on the issue after receiving the recommendations of an expert committee.
The Finance Act, 2017, had amended the MAT provisions (Section 115JB) for IndAS compliant companies with effect from April 1, 2017.
Barring banks, insurance and non-banking financial companies, most companies are required to adopt Ind AS from April 1, 2017. Small unlisted firms of less than Rs 250 crore of net worth, subsidiaries, joint ventures and holding companies are, however, exempted.