In a significant compliance development, the Central Board of Direct Taxes (CBDT) has introduced Form No. 66, prescribing a detailed format for the computation of book profit under Section 206(1) of the Income-tax Act. The newly notified form lays down an extensive reporting framework to ensure uniform calculation and certification of book profits for companies.
Structured Reporting Framework
Form 66 is divided into multiple parts requiring companies to furnish granular financial and tax-related disclosures.
Part A – General Information mandates basic company details such as name, address, PAN, contact information, tax year, total income under the Act, and income-tax payable. It also requires disclosure of the financial year adopted under the Companies Act, 2013 and confirmation regarding preparation of financial statements in accordance with Schedule III of the Act.
The form seeks clarity on whether the financial year aligns with the relevant tax year and whether consistent accounting policies, standards, and depreciation methods have been followed. In case of deviations, detailed explanations and workings are required to be attached.
Adjustments to Book Profit
Part B deals with specific additions and deductions to be made to the profit as per the statement of profit and loss. Companies must report adjustments under various clauses of Section 206(1)(c) and 206(1)(d), including gains or losses on transfer of units and other prescribed items.
The form requires aggregation of additions and deductions, ensuring a transparent reconciliation mechanism before arriving at the final book profit figure.
Transition Amount Under Ind AS
A notable feature of the form is Part C, which addresses the “transition amount” as defined under Section 206(1)(t). This primarily concerns adjustments arising from convergence to Indian Accounting Standards (Ind AS).
Companies are required to disclose adjustments relating to:
- Capital reserve and securities premium reserve
- Other comprehensive income subject to reclassification
- Revaluation surplus under Ind AS 12 and Ind AS 38
- Fair valuation of financial instruments under Ind AS 109
- Fair value adjustments treated as deemed cost under Ind AS 101
- Cumulative translation differences of foreign operations
The transition amount is to be spread over five years, with one-fifth adjusted annually, and detailed year-wise tracking is mandated.
Computation of Tax Payable
Part D culminates in the computation of book profit under Section 206(1) and the tax payable thereon. Companies must also specify whether they are units located in an International Financial Services Centre (IFSC) deriving income solely in convertible foreign exchange or fall under the category of “any other company,” as the applicable tax rate may differ.
Mandatory Chartered Accountant Certification
The form includes a certification section requiring verification by a Chartered Accountant holding a valid certificate of practice under the Chartered Accountants Act, 1949. The accountant must confirm that the book profit has been computed in accordance with the statutory provisions and certify the tax payable under Section 206(1).
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