Companies (Indian Accounting Standards) Amendment on OECD Pillar Two Rules - Key Aspects

The Central Government, in consultation with the National Financial Reporting Authority (NFRA), has amended the Companies (Indian Accounting Standards) Rules, 2015 to clarify how entities should account for Organisation for Economic Co-operation and Development (OECD) Pillar Two global minimum tax (15% effective tax rate).

The amendment introduces a specific carve-out in Indian Accounting Standard (Ind AS) 12 (Income Taxes):

No deferred tax accounting for Pillar Two income taxes

Entities shall neither recognise nor disclose deferred tax assets or liabilities arising from Pillar Two legislation, including Qualified Domestic Minimum Top-Up Taxes (QDMTTs)

Why this exception exists

• Pillar Two operates on a jurisdictional effective tax rate, not the usual ‘taxable profit’ model.

• Temporary differences that drive deferred tax under normal rules do not map cleanly to Pillar Two calculations.

• Recognising deferred taxes could produce complex, unreliable, and potentially misleading numbers.

We do not know if this relief is temporary or permanent in nature. It is based on the International Accounting Standards Board (IASB) 2023 amendment to IAS 12, and the MCA amendment does not prescribe any sunset date.

Effective dates and transitional guidance

Paragraph in Ind AS 12	Scope	Effective Date / Transitional Relief
4A & 88A	Recognition, measurement, and exceptions	Apply immediately and retrospectively per Ind AS 8
88B–88D	Additional disclosure requirements	Apply for annual reporting periods from 1 April 2025
Interim relief	Disclosure under 88B–88D	Not required for any interim period ending on or before 31 March 2026

Example – Pillar Two Tax Treatment

Scenario*:

• Subsidiary in Country X

• Country X effective tax rate: 10%

• OECD Pillar Two minimum tax: 15%

• Profit before tax: ₹100 crore

• GloBE income after substance based carve out: ₹90 crore

Item	Calculation	Treatment
Current tax (Country X)	₹100 crore*10%	Recognise ₹10 crore in P&L
Pillar Two top-up tax (Top-up tax rate = 15% - 10%= 5%)	₹90 crore*5%	Recognise ₹4.5 crore as current tax in P&L
Deferred tax on Pillar Two	-	Do not recognise (per Ind AS 12 carve-out)

*Figures are illustrative only. Pillar Two applies at the group level to large multinational enterprises (MNEs) with consolidated revenues ≥ €750 million

Disclosures:

• FY 2024–25: Apply retrospectively as per Ind AS 8, including adjustments to comparatives/opening balances where relevant

• FY 2025–26: disclose Pillar Two exposure under 88B–88D.

• Interim reporting before 31 March 2026: no disclosure required.

This article is for informational purposes only. For specific advice based on your case, consider consulting a qualified chartered accountant or tax professional.