The Government of India is working on a plan to bring its separate tax and financial reporting regimes under a single framework, business publication Mint reported.

The goal of the exercise is to remove one of the most persistent compliance pain points for companies.

The proposed reform would seek to align Indian Accounting Standards (IndAS), which govern corporate financial statements for investors and shareholders, with the Income Computation and Disclosure Standards (ICDS) used for tax purposes.

If implemented, this would mark the most far-reaching change to India’s accounting architecture since IndAS came into force in 2016.

At present, the two systems are based on different accounting philosophies.

The tax accounting standards, or ICDS, are issued by the Income Tax Department, while IndAS is notified by the Ministry of Corporate Affairs.

IndAS is designed to reflect a company’s economic position at a particular date, drawing on fair value measurements of assets and liabilities.

Although ICDS does not alter book profits or raise the total tax outgo over the long term, it does restrict the scope to shift tax payments into later years.

Under IndAS, mark-to-market changes – for instance in financial instruments – are recognised in the accounts, whereas ICDS generally relies on historical cost for asset valuation to contain fluctuations in taxable income.

The Ministry of Corporate Affairs and the Central Board of Direct Taxes are now moving to constitute a committee to work on integrating the two standards, as flagged in the Union Budget for financial year 2027 (FY27).

The unified framework is set to apply from the tax year 2027–28, covering income earned in FY26–27.