MCA aligns accounting standards with OECD's Pillar Two Model Rules

New Delhi, Mar 18, 2026

Companies must disclose exposure to Pillar Two income taxes under revised AS 22, while small and medium-sized firms are exempt from the new requirements

Companies would have to disclose if they have applied the exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes, according to the Companies (Accounting Standards) Amendment Rules, released on Wednesday.

The amendments have been done to align India’s Accounting Standard (AS) 22 to incorporate global tax developments arising from the Organisation for Economic Co-operation and Development (OECD)’s Pillar Two Model Rules.

According to the notification dated March 10, information that companies would have to disclose would include, for instance, how they are affected by the Pillar Two legislation and the main jurisdictions in which exposures to Pillar Two income taxes might exist. Quantitative information, such as an indication of the proportion of an enterprise’s profits that might be subject to Pillar Two income taxes and the average effective tax rate applicable to those profits, would have to be disclosed by enterprises, according to revised accounting rules.

The Ministry of Corporate Affairs (MCA) has clarified that these disclosure requirements would not apply to small and medium-sized companies.

“In periods in which Pillar Two legislation is enacted or substantively enacted but not yet in effect, an enterprise should disclose known or reasonably estimable information that helps users of financial statements understand the enterprise’s exposure to Pillar Two income taxes arising from that legislation,” the MCA notification said.

Pillar Two requires multinational groups to calculate whether their effective tax rate in each jurisdiction meets the 15 per cent threshold, failing which a top-up tax applies.

[The Business Standard]