Notification No. G.S.R. 169(E), Dated 10.03.2026
The Ministry of Corporate Affairs (MCA) has notified the Companies (Accounting Standards) Amendment Rules, 2026, introducing amendments to Accounting Standard (AS) 22 – Accounting for Taxes on Income.
The amendments aim to align Indian accounting requirements with the OECD’s global tax reform framework under the Pillar Two Model Rules, which introduce a global minimum tax regime.
1. Applicability of AS-22 to Pillar Two Taxes
A new paragraph 2A has been inserted in AS-22 clarifying that the standard will apply to taxes arising from legislation enacted to implement the OECD’s Pillar Two rules, including Qualified Domestic Minimum Top-Up Taxes (QDMTT).
However, the amendment introduces a specific exception under which enterprises are not required to recognise or disclose deferred tax assets or deferred tax liabilities arising from Pillar Two income taxes.
2. New Disclosure Requirements
The amendment also introduces new disclosure requirements through paragraphs 32A to 32D.
2.1 Disclosure of Application of Deferred Tax Exception
Enterprises must disclose that they have applied the exception relating to deferred taxes for Pillar Two income taxes.
2.2 Separate Disclosure of Current Tax Impact
Entities are required to separately disclose the current tax expense or income relating to Pillar Two taxes in their financial statements.
2.3 Disclosure of Potential Exposure to Pillar Two Taxes
Where Pillar Two legislation has been enacted or substantively enacted but is not yet effective, enterprises must provide qualitative and quantitative disclosures explaining their potential exposure to such taxes.
These disclosures may include:
- Jurisdictions where the entity may be affected
- The proportion of profits exposed to Pillar Two taxation
- The indicative impact on the effective tax rate
3. Exemption for Small and Medium-Sized Companies
Small and Medium-sized Companies (SMCs) have been exempted from the disclosure requirements under paragraphs 32C and 32D, thereby reducing the compliance burden for smaller entities.
4. Effective Date
The amendments have come into effect immediately upon notification. However, certain disclosure requirements will apply for reporting periods beginning on or after 1 April 2025.
5. Objective of the Amendment
The amendments aim to:
- Align Indian accounting standards with the OECD’s global minimum tax framework
- Provide clarity on accounting treatment for Pillar Two taxes
- Ensure transparent disclosures of potential tax impacts in financial statements
- Maintain consistency with evolving international financial reporting practices.
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