New & Updated Indian Accounting Standards (Ind AS) – FY 2025–26

By Zainab Rampurawala | Published: Jan 12, 2026

New & Updated Indian Accounting Standards (Ind AS) – FY 2025–26

The Ministry of Corporate Affairs (MCA), in alignment with recent IFRS developments, has notified several amendments to Indian Accounting Standards (Ind AS) applicable from 1 April 2025. These changes aim to improve transparency, enhance comparability, and address emerging accounting issues such as supplier finance arrangements, global minimum tax (Pillar Two), and foreign currency exchangeability.

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1. Ind AS 21 – The Effects of Changes in Foreign Exchange Rates

Key Amendment

The amendment introduces new guidance on determining the spot exchange rate when a currency is not exchangeable. This situation may arise due to legal restrictions, lack of an active market, or government controls.

What is New?

• Entities must estimate the spot exchange rate when exchangeability is temporarily or permanently unavailable.
• The estimated rate should reflect the rate at which an entity could have exchanged the currency at the measurement date.
• Additional disclosures are required explaining:
  • Nature of the restriction
  • Carrying amounts affected
  • Risks arising due to non-exchangeability

Practical Impact

This amendment is particularly relevant for entities operating in jurisdictions with foreign exchange controls or hyperinflationary economies.

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2. Ind AS 1 – Presentation of Financial Statements

Key Amendment: Classification of Liabilities

The amendment clarifies that classification of liabilities as current or non-current depends on the entity’s right to defer settlement at the reporting date, and not on management intention or expectations.

Important Clarifications

• If the right to defer settlement exists at the reporting date → Non-current
• If such right does not exist → Current
• Loan covenants tested after the reporting period do not affect classification

Audit & Reporting Impact

Entities must carefully review loan agreements and covenant clauses as of the balance sheet date to ensure correct classification.

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3. Ind AS 7 & Ind AS 107 – Supplier Finance Arrangements

Background

Supplier Finance Arrangements (also known as Supply Chain Financing or Reverse Factoring) have increased significantly and required enhanced transparency.

New Disclosure Requirements

• Description of supplier finance arrangements
• Carrying amount of liabilities subject to such arrangements
• Payment terms compared with normal trade payables
• Impact on liquidity risk and cash flows

Presentation Impact

In certain cases, trade payables under supplier finance arrangements may need to be presented separately from regular trade payables.

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4. Ind AS 12 – Income Taxes (Pillar Two Tax Rules)

Overview

The amendment introduces an exception related to the OECD’s Pillar Two Global Minimum Tax framework.

Accounting Treatment

• No recognition of deferred tax assets or liabilities arising from Pillar Two taxes
• Mandatory disclosures about:
  • Exposure to Pillar Two legislation
  • Jurisdictions where applicable
  • Potential impact on future tax expense

Why This Matters

This avoids complexity and volatility in deferred tax calculations while still ensuring transparency for users of financial statements.

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5. Ind AS 101 – First-time Adoption of Ind AS

Key Changes

• Alignment with amended Ind AS 21 for hyperinflationary economies
• Clarifications on lease classification exemptions

Applicability

These amendments mainly affect entities transitioning from Indian GAAP to Ind AS from FY 2025–26 onwards.

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6. Other Minor Amendments

• Ind AS 10: Minor terminology updates relating to covenants
• Ind AS 108, 109, 115, 28 & 32: Technical corrections and alignment with IFRS wording

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Effective Date Summary

Standard	Nature of Amendment	Effective From
Ind AS 21	Foreign currency exchangeability	1 April 2025
Ind AS 1	Liability classification	1 April 2025
Ind AS 7 & 107	Supplier finance disclosures	1 April 2025
Ind AS 12	Pillar Two tax exception	1 April 2025

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Conclusion

The FY 2025–26 Ind AS amendments represent a significant step towards enhanced financial reporting transparency and global alignment. Entities should assess the impact early, update accounting policies, and ensure adequate disclosures to avoid last-minute compliance challenges.

Income-tax Bill, 2025 - Detailed Summary of FAQs

By Zainab Rampurawala | Published: Jan 11, 2026

Income-tax Bill, 2025 – Detailed Summary of FAQs

The Income-tax Bill, 2025 is primarily a simplification and consolidation exercise rather than a policy reform. The Government has clarified through multiple FAQs that the objective of the Bill is to make the income-tax law easier to read, easier to comply with, and less litigation-prone, while retaining the same tax principles, rates, and incidence as under the Income-tax Act, 1961 (as amended by Finance Act, 2025).

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1. Structural Simplification and Key Concepts

Introduction of “Tax Year”

The Bill introduces the concept of a “tax year”, replacing the term “previous year” and eliminating the concept of “assessment year”.

• A tax year is a 12-month period aligned with the financial year.
• All references to income computation, tax rates, and assessment now relate to the same tax year.
• This removes confusion caused by the coexistence of two different years under the earlier law.

A tax year may be shorter than a financial year in cases such as:

• Newly set-up businesses
• New sources of income arising during the year

Why “Financial Year” Continues

The term financial year continues for procedural and compliance-related purposes such as due dates, time limits, and administrative actions. It is defined under the General Clauses Act, 1897.

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2. Charging of Income-tax

There is no change in the charging principle.

Earlier, tax was charged on the total income of the previous year for the assessment year. Under the new Bill, tax is charged on the total income of the tax year itself.

The charging section has been rewritten into shorter and clearer sub-sections to improve readability.

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3. Exemptions (Earlier Section 10)

Major Restructuring

Section 10 of the Income-tax Act, 1961 had nearly 140 clauses along with numerous provisos and explanations, making it difficult to comprehend.

Under the new Bill:

• All exemption provisions are moved to six separate Schedules
• Each Schedule is category-specific
• Exemptions are presented in a tabular format showing income, eligible persons, and conditions

Impact

• Over 90 explanations and 134 provisos removed
• Word count reduced from approximately 30,000 to 13,500
• Sunset clauses omitted
• Past exemptions protected through saving clauses

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4. Salary and Income from House Property

Salary

The salary chapter has been drafted so that a salaried taxpayer can understand and comply without professional help.

• All salary-related provisions consolidated
• Clear explanation of perquisites, profits in lieu of salary, and standard deduction
• Legal jargon minimized
• Redundant provisions removed

House Property

Minimal changes have been made as the existing provisions were already simple and widely understood. The restructuring focuses mainly on clarity and presentation.

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5. Profits and Gains of Business or Profession (PGBP)

This chapter has undergone extensive restructuring without altering tax policy.

• Sections reduced from 65 to 41
• Word count reduced by more than 50%
• Logical sequencing of provisions
• Similar provisions merged
• Tables and formulas introduced for complex concepts

Key areas clarified include depreciation, actual cost, written-down value, bad debts, scientific research expenditure, deferred expenditure, and presumptive taxation.

No change has been made to rates, eligibility, or timing of deductions.

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6. Clubbing of Income

There is no change in the incidence or scope of clubbing provisions.

However, language has been simplified, redundancies removed, and formulas introduced to bring certainty and ease of computation.

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7. Deeming Provisions (Unexplained Income)

Provisions relating to unexplained income have been reorganized and simplified.

The term “cash credits” has been replaced with “unexplained credits” to reflect the true nature of the provision.

Applicable tax rates have been specified within the chapter itself to reduce disputes.

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8. Set-off and Carry-forward of Losses

Obsolete and transitional provisions have been removed. Budget 2025 amendments have been incorporated without affecting taxpayer rights.

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9. Chapter VIA Deductions

Deductions such as 80C, 80D, 80TTA/80TTB, 80G, startup incentives, and IFSC benefits continue unchanged.

Provisos and explanations have been merged into main sections, while detailed lists are placed in Schedules for better readability.

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10. Advance Tax, Refunds, and Interest

No policy changes have been made.

• Separate sections for voluntary payment and AO-directed payment
• Clear formulas for interest computation
• Tables specifying start date, end date, and base amount

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11. Special Rate Taxation and New Tax Regime

Taxpayers who have already opted for the new tax regime need not opt again.

Budget 2025 slab changes are incorporated. No change has been made to rates or eligibility conditions.

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12. Double Taxation Avoidance Agreements (DTAA)

The Bill clarifies the interpretation of undefined treaty terms through a clear hierarchy:

1. Treaty definition
2. Definition under the Act
3. Government notification
4. Other central tax laws

This provides certainty and aligns with international tax practices.

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13. Tonnage Tax

No substantive changes have been made. Provisions have been reorganized for clarity and Budget 2025 changes included.

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14. Tax Administration

Roles of tax authorities have been clearly defined. Chapters have been merged to reduce duplication, and faceless procedures continue.

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15. Offences and Prosecution

There is no increase in punishment and no new offences have been introduced.

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16. Assessment and Reassessment

Time limits and procedures have been converted into tables. Faceless assessment provisions have been simplified. No major policy changes have been made.

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17. Return of Income

All categories of assessees required to file returns are listed in one place. Due dates remain unchanged, and provisions for belated, revised, and updated returns continue.

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18. TDS and TCS

One of the most significant simplifications under the Bill.

• 69 sections consolidated into 2 main sections
• Rates, thresholds, and conditions presented in tables
• Separate sections for certificates, compliance, defaults, and processing

There is no change in TDS/TCS rates or threshold limits.

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Conclusion

The Income-tax Bill, 2025 is a comprehensive simplification initiative rather than a tax reform. It preserves existing tax policy while improving clarity, structure, and ease of compliance, making the law more accessible for taxpayers.

Understanding Aggregate Financial Statements under UAE Corporate Tax Law

By Zainab Rampurawala | Published: Oct 5, 2025

Here is a detailed explanation of “aggregated (or aggregate) financial statements / aggregate financials” under the UAE corporate tax (CT) regime: what it means, to whom it applies, its effective date, and key technical points (based on available guidance). Because the regime is relatively new and evolving, some aspects remain subject to further clarifications from the UAE Federal Tax Authority (FTA).

What are Aggregate Financial Statements?

In the UAE CT law context, aggregated financial statements refer to financial statements prepared for a tax group (i.e. a group of entities treated as a single taxable person for CT) by aggregating the individual (standalone) financial statements of each member of the tax group and making eliminations of intra‑group transactions, for the purpose of CT compliance.

These are not consolidated financial statements in the IFRS sense (i.e. they do not reflect goodwill, fair‑value adjustments, etc.). Instead, they present the group’s combined results on a line‑by‑line aggregation basis (with intra‑group eliminations).

• Prepared by aggregating standalone financial statements of each member.
• Intra‑group transactions are eliminated (income, expense, balances, gains/losses).
• Consolidation adjustments (like goodwill, fair value uplift) are excluded, unless it’s an asset acquisition.
• They must be audited and presented in AED.

Applicability – To Whom Do They Apply?

Aggregated financials apply specifically to tax groups under the UAE Corporate Tax regime.

Tax Group

• A tax group is formed when a parent and subsidiaries elect to be treated as a single taxable person under UAE CT law.
• The parent must apply to the FTA for recognition of the group.
• Conditions include: common ownership, same financial year, and consistent accounting policies.

Important: If a taxpayer is a standalone entity, the concept of aggregated financials does not apply. They just use their standalone audited/unaudited statements for CT.

Effective Date

• FTA Decision No. 7 of 2025 applies for tax periods commencing on or after 1 January 2025.
• Earlier tax periods (before 2025) are covered by Ministerial Decision No. 82 of 2023.
• Ministerial Decision No. 84 of 2025 (on audited financial statements) also applies from tax periods starting 1 January 2025 and replaces Decision 82 for later years.

Key Rules and Considerations

Topic	Key Points
Aggregation basis	Sum line‑by‑line the standalone financials of each group member.
Elimination	Eliminate intra‑group income, expenses, balances, and unrealised gains/losses.
Exclusion of consolidation adjustments	No goodwill or IFRS 3 adjustments (unless asset acquisition).
Consistent policies	All members must apply uniform accounting policies.
Investments in non‑group entities	Carried at cost less impairment (not equity method or fair value).
Presentation	In AED. Must include statement of financial position, profit or loss, OCI, changes in equity, and notes.
Audit requirement	Aggregated financials must be audited (special purpose framework).
Comparatives	Challenges may arise for comparatives if earlier aggregated financials were not prepared.
Member leaving group	Departing member adopts opening balances from aggregated statements (unless accounting standards prohibit).

Why Require Aggregate Financial Statements?

1. Tax symmetry – ensures intra-group transactions don’t distort tax base.
2. Simplification – avoids full IFRS consolidation complexities.
3. Auditability – one unified set of financials for the FTA to review.
4. Compliance – reduces manipulation opportunities and enforces consistency.

Practical Challenges

• Aligning accounting policies across group entities.
• Eliminating intra‑group balances and profits accurately.
• Handling comparatives when prior aggregated financials don’t exist.
• Audit complexities for large groups with many subsidiaries.
• Reconciling accounting standards with CT requirements.

Summary

Aggregate financial statements under UAE CT law are required for tax groups (not standalone entities). They aggregate standalone financials, eliminate intra-group transactions, exclude IFRS consolidation adjustments, and must be audited. Effective for tax periods starting 1 January 2025, these statements form the basis for computing the group’s taxable income.

UAE Corporate Tax - Small Business Relief (SBR) Explained

By Zainab Rampurawala | Published: Sept 3, 2025

📖 Introduction

The UAE Corporate Tax (CT) regime, effective from June 2023, was designed to boost transparency, align with international tax practices, and support economic growth. However, the government also recognizes that small businesses and startups form the backbone of the UAE economy. To ease their compliance burden, the Federal Tax Authority (FTA) introduced the concept of Small Business Relief (SBR).

This provision allows eligible businesses to minimize their tax obligations and compliance requirements, enabling them to focus on growth.

🔹 What is Small Business Relief?

Small Business Relief is an exemption mechanism under the UAE CT Law. Eligible businesses can elect to be treated as if their taxable income is zero, meaning no corporate tax liability arises for that period.

In simple terms: If your business qualifies, you don’t pay corporate tax, and you enjoy simplified compliance.

🔹 Eligibility Criteria

Not all businesses can claim SBR. To qualify, the following conditions must be met:

• Revenue Threshold: Business must have revenue below AED 3 million for the relevant tax period and for all previous tax periods ending on or before 31 December 2026.
• Entity Type: Applies to resident juridical persons (companies) and natural persons (individuals conducting business).
• Exclusions: Not available for:
  • Qualifying Free Zone Persons
  • Constituent companies of Multinational Enterprises (MNEs) with revenues of AED 3.15 billion or more
  • Businesses engaged in excluded activities (e.g., extractive/non-extractive natural resources)

🔹 Key Benefits of SBR

• ✅ No Corporate Tax Payable – Businesses under SBR are treated as having zero taxable income.
• ✅ Reduced Compliance Burden – Simplified record-keeping and fewer reporting requirements.
• ✅ Encourages Startups & SMEs – Allows young businesses to reinvest profits in growth.
• ✅ Temporary Relief – Available for financial years up to 31 December 2026 (subject to review).

🔹 Example

Suppose a consultancy firm in Dubai has annual revenue of AED 2.5 million in 2024. Since it is below the AED 3 million threshold, it can elect for Small Business Relief. This means:

• Its taxable income will be considered zero.
• It will not pay the 9% corporate tax.
• It still needs to maintain basic records, but compliance requirements are significantly reduced.

🔹 Key Considerations

• Businesses must formally elect for SBR in their corporate tax return.
• Revenue calculation must follow accounting standards (IFRS).
• If revenue exceeds AED 3 million in a future year, SBR cannot be claimed for that year and subsequent years.

✅ Conclusion

Small Business Relief is a game-changer for startups and SMEs in the UAE. It not only reduces financial pressure but also encourages entrepreneurship by giving businesses breathing room during their initial growth years. However, companies must carefully evaluate their eligibility and maintain proper documentation to avoid penalties.

© 2025 ZHR Accounting & Tax Consultants – All rights reserved.

UAE VAT – Common errors in invoice formats that lead to penalties

By Zainab Rampurawala | Published: Aug 29, 2025

Implementing VAT correctly in the UAE is critical for businesses, not only to comply with Federal Tax Authority (FTA) regulations but also to avoid penalties. One of the most common areas where businesses face penalties is the incorrect format of tax invoices.

Let’s explore the common mistakes, provide examples, and reference the UAE VAT law to help you stay compliant.

1. Not Listing Items Line by Line

Issue: VAT law requires that taxable supplies should be clearly described on the invoice. Listing multiple items as a single description makes it impossible to verify the VAT amount for each item.

Non-Compliant Example:

Description	Total Amount
Electronics Bundle	AED 10,000

Compliant Example:

Item	Quantity	Unit Price	VAT
Laptop	2	AED 3,000	AED 300
Printer	1	AED 4,000	AED 200
Total Amount			AED 10,000, VAT AED 500

Reference: Article 53 of the UAE VAT Law (Federal Decree-Law No. 8 of 2017) requires a tax invoice to show the quantity and description of goods or services.

2. Missing Total Amount

Issue: Invoices must clearly show the total for the net amount, VAT, and gross amount. Missing totals can result in penalties.

Non-Compliant Example:

Service	Amount	VAT
Service A	AED 1,000	5%
Service B	AED 2,000	5%

Compliant Example:

Service	Amount	VAT
Service A	AED 1,000	AED 50
Service B	AED 2,000	AED 100
Total	AED 3,000	AED 150

Reference: Article 53 and FTA guidelines on Tax Invoice Requirements specify that total amounts must be clearly stated.

3. Not Separating VAT for Each Line Item

Issue: VAT must be shown separately for each item or service. Aggregating VAT for all items is not compliant.

Non-Compliant Example:

Description	Amount	VAT
Office Supplies	AED 1,000	Total VAT AED 50

Compliant Example:

Description	Amount	VAT
Office Supplies	AED 1,000	AED 50

Reference: Article 53(1)(d) of the UAE VAT Law specifies that VAT must be shown separately for each item.

4. Missing Mandatory Invoice Details

A UAE VAT tax invoice must include:

• Seller’s name, address, and TRN
• Customer’s name, address, and TRN (if registered)
• Invoice number and date
• Description of goods/services
• Quantity and unit price
• Total taxable amount
• VAT rate and VAT amount

Common Penalty: FTA fines start from AED 5,000 for invoicing errors.

✅ Key Takeaways for Businesses

• Always list items line by line with quantity, unit price, and VAT.
• Include a total amount for net, VAT, and gross values.
• Ensure VAT is separately shown for each line item.
• Verify all mandatory invoice details are present.
• Regularly review invoices to ensure compliance with FTA guidelines.

By maintaining proper invoice formats, businesses can avoid penalties, improve transparency, and simplify VAT audits.

© 2025 ZHR Accounting & Tax Consultants – All rights reserved.

IFRS 15 – 5 step revenue recognition model explained

By Zainab Rampurawala | Published: Aug 29, 2025

📖 Introduction

Revenue recognition is one of the most critical areas of financial reporting. Misstating revenue can significantly impact investor decisions and attract regulatory scrutiny. To bring consistency and comparability across industries and jurisdictions, the International Accounting Standards Board (IASB) introduced IFRS 15 – Revenue from Contracts with Customers. This standard introduces a 5-step model that entities must follow when recognizing revenue.

🔹 Step 1: Identify the Contract with a Customer

A contract is an agreement between two or more parties that creates enforceable rights and obligations. For a contract to exist under IFRS 15, it must be approved by both parties, have clear payment terms, and the transaction must be commercially viable.

Example: A software company signs a 12-month service contract with a client. This agreement constitutes a valid contract under IFRS 15.

🔹 Step 2: Identify the Performance Obligations

Performance obligations are promises in a contract to transfer goods or services. Each distinct good or service must be identified separately.

Example: A mobile operator selling a phone bundled with a 1-year service plan has two distinct performance obligations: (1) the phone, and (2) the service plan.

🔹 Step 3: Determine the Transaction Price

The transaction price is the amount the company expects to be entitled to in exchange for fulfilling its obligations. It includes fixed amounts, variable considerations (like bonuses/penalties), and discounts.

Example: A contractor agrees to build a road for AED 10 million with a performance bonus of AED 500,000 if completed early. The bonus is considered part of the transaction price if it is highly probable to be earned.

🔹 Step 4: Allocate the Transaction Price to Performance Obligations

When multiple performance obligations exist, the transaction price must be allocated based on the relative stand-alone selling prices of each obligation.

Example: The mobile operator allocates part of the total package price to the phone and part to the service plan, based on their individual market prices.

🔹 Step 5: Recognize Revenue When (or As) Performance Obligations Are Satisfied

Revenue is recognized either over time or at a point in time, depending on when control of the good or service passes to the customer.

Example: The phone revenue is recognized at the point of sale, while the service revenue is recognized over 12 months.

✅ Key Takeaways

• IFRS 15 standardizes how companies recognize revenue across industries.
• Businesses must carefully assess contracts, obligations, and pricing to ensure compliance.
• The 5-step model improves transparency and helps investors better understand revenue streams.

© 2025 ZHR Accounting & Tax Consultants – All rights reserved.