Companies (Accounting Standards) Amendment Rules, 2026
Companies (Accounting Standards) Amendment Rules, 2026 – Key Highlights
The Central Government has issued the Companies (Accounting Standards) Amendment Rules, 2026 under the authority of Section 133 read with Section 469 of the Companies Act, 2013. The amendments have been introduced after consultation with the National Financial Reporting Authority (NFRA).
These rules modify the Companies (Accounting Standards) Rules, 2021, particularly Accounting Standard (AS) 22 – Accounting for Taxes on Income, to incorporate provisions relating to the OECD’s Pillar Two global minimum tax framework.
The amendment becomes effective from the date of its publication in the Official Gazette.
Introduction of Provisions Related to Pillar Two Tax Rules
A new paragraph (2A) has been inserted in AS 22 to clarify the applicability of the standard to taxes arising from legislation introduced to implement the OECD Pillar Two Model Rules. These rules aim to establish a global minimum tax framework and may include provisions such as qualified domestic minimum top-up taxes.
Under this amendment, any tax law enacted to implement these rules is referred to as “Pillar Two legislation”, and the taxes arising from such legislation are referred to as “Pillar Two income taxes.”
Importantly, the amendment provides an exception from the usual accounting treatment for deferred taxes. Enterprises are not required to recognise or disclose deferred tax assets or liabilities that arise specifically from Pillar Two income taxes.
Additional Disclosure Requirements
The amendment also introduces several disclosure provisions relating to Pillar Two taxes.
Enterprises must disclose that they have applied the exemption relating to the recognition and disclosure of deferred tax assets and liabilities for Pillar Two income taxes.
In addition, companies are required to separately disclose the current tax expense or income attributable to Pillar Two income taxes, ensuring that users of financial statements can clearly identify the tax impact arising from such legislation.
Disclosure When Pillar Two Legislation Is Enacted but Not Yet Effective
If legislation implementing Pillar Two rules has been enacted or substantively enacted but is not yet effective, enterprises are required to provide information that helps users of financial statements understand the company’s potential exposure to Pillar Two taxes.
This disclosure should include information that is known or reasonably estimable as of the reporting date.
To meet this requirement, enterprises may provide:
- Qualitative information explaining how the company may be affected by Pillar Two legislation and identifying the main jurisdictions where such tax exposure may arise.
- Quantitative information indicating the potential financial impact of such legislation.
For example, companies may disclose the proportion of profits that could be subject to Pillar Two taxes or indicate how the company’s average effective tax rate might have changed if the Pillar Two rules had already been in force.
Where such information cannot be determined with reasonable certainty, the enterprise should disclose that the information is not currently known or reasonably estimable and provide an update on the progress made in assessing the potential exposure.
Relaxation for Small and Medium-Sized Companies
Small and Medium-Sized Companies have been granted relief from certain disclosure requirements introduced under the amendment. Specifically, they are not required to provide the detailed exposure disclosures relating to Pillar Two legislation that are otherwise required when such legislation has been enacted but is not yet effective.
Effective Date of the Amendments
The amendment introduces specific timelines for implementation.
The provisions relating to the exception for recognising and disclosing deferred tax assets and liabilities (paragraphs 2A and 32A) are to be applied immediately upon issuance of the amendment, and they are required to be applied retrospectively.
The additional disclosure requirements relating to current tax and exposure to Pillar Two income taxes (paragraphs 32B to 32D) will apply to annual reporting periods beginning on or after 1 April 2025.
However, companies are not required to provide these disclosures for interim financial statements for any reporting period ending on or before 31 March 2026.
Background
The Companies (Accounting Standards) Rules, 2021, which form the base framework for accounting standards applicable to companies following Indian GAAP, were originally notified in the Gazette of India on 23 June 2021 (G.S.R. 432(E)).
The present amendment aligns the accounting framework with developments in international tax reform, particularly the OECD-led initiative to introduce a global minimum corporate tax system.
