The Ministry of Corporate Affairs (MCA) has notified the Companies (Accounting Standards) Amendment Rules, 2026, introducing significant changes to Accounting Standard (AS) 22 relating to accounting for taxes on income.
The amendment primarily incorporates provisions linked to the global minimum tax framework under the Pillar Two model rules developed by the Organisation for Economic Co-operation and Development (OECD). The notification was issued on March 10, 2026, and took effect from the date of its publication in the Official Gazette.
The amendment modifies the Companies (Accounting Standards) Rules, 2021 by inserting new provisions that deal with accounting and disclosure requirements for taxes arising from legislation implementing the OECD’s global minimum tax rules. These reforms are part of the international effort to ensure that multinational enterprises pay a minimum level of tax in the jurisdictions where they operate.
Key Change: No Deferred Tax Recognition for Pillar Two Taxes
A major change introduced through paragraph 2A of AS-22 provides that enterprises are not required to recognise or disclose deferred tax assets or liabilities related to income taxes arising from Pillar Two legislation. The provision creates a specific exception to the existing requirements under AS-22 for taxes imposed under laws implementing the global minimum tax regime, including qualified domestic minimum top-up taxes.
New Disclosure Requirements Introduced
The amendment also inserts paragraphs 32A to 32D, introducing additional disclosure obligations. Companies must disclose that they have applied the exemption relating to deferred taxes under Pillar Two rules and separately report any current tax expense or income related to Pillar Two income taxes.
Further, in situations where Pillar Two legislation has been enacted or substantively enacted but is not yet in force, enterprises must disclose information that helps users of financial statements understand their potential exposure to such taxes. This may include qualitative information about how the company may be affected and quantitative indicators such as the portion of profits likely to fall under the Pillar Two tax regime or the potential impact on the company’s effective tax rate.
Relaxation for Smaller Companies
The rules provide relief for small and medium-sized companies, which are not required to comply with the detailed disclosure requirements relating to exposure to Pillar Two taxes.
Applicability
The provisions relating to the exception for deferred taxes and disclosure of its application will apply immediately and retrospectively, while the disclosure requirements relating to current tax expense and exposure will apply to annual reporting periods beginning on or after April 1, 2025. However, companies are not required to make such disclosures for interim periods ending on or before March 31, 2026.
Notification Details
Notification No. F. No. 17/51/2013-CL-V
Date: 10/03/2026
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