Assurance Gazette – March 2026 Edition

Welcome to the Assurance Gazette for March 2026 Edition. This edition present the OECD’s Pillar Two Global Minimum Tax framework introduces a minimum effective tax rate of 15% for large multinational enterprises and represents a significant shift in the global tax landscape.

In this regard, the Ministry of Corporate Affairs (MCA), vide notification dated March 10, 2026, has amended Accounting Standard (AS) 22 – Accounting for Taxes on Income through the Companies (Accounting Standards) Amendments Rules, 2026. The amendment seeks to address the accounting implications arising from the implementation of the Pillar Two framework. This article aims to provide insights into the amendment and highlighting its impact on the f financial statements.

Complementing the discussion on global tax developments, this edition also provides a structured overview of the evolving regulatory and governance framework applicable to Section 8 Companies under the Companies Act, 2013, drawing from key practical clarifications issued by ICAI. It highlights critical compliance expectations relating to utilisation of funds, audit requirements, related party transactions, insolvency exposure, and foreign contribution regulations, thereby enabling not-for-profit entities to balance their social objectives with robust corporate governance and financial discipline.

Amendment to AS 22 (Accounting for Taxes on Income) relating to OECD Pillar Two Taxes

I. Background

The Ministry of Corporate Affairs (MCA), vide notification dated March 10, 2026, has issued the Companies (Accounting Standards) Amendments Rules, 2026, thereby amending Accounting Standard (AS) 22 – Accounting for Taxes on Income. This amendment addresses the accounting implications arising from the OECD’s Pillar Two Global Minimum Tax framework.

The Pillar Two framework aims to ensure that large multinational enterprises (MNEs) are subject to a minimum effective tax rate of 15% across jurisdictions.

II. Objective of the Amendment

The amendment primarily seeks to:

• Provide a temporary mandatory relief from recognizing deferred tax assets and liabilities related to ‘Pillar Two taxes’; and
• Introduce enhanced disclosure requirements in respect of ‘Pillar Two taxes’.

III. Key Amendment – Recognition Exception

The amendment to AS-22 introduces a temporary mandatory exception from recognizing deferred tax assets (DTA) and deferred tax liabilities (DTL) arising from Pillar Two taxes. Accordingly, entities are not required to recognize or disclose deferred tax assets/liabilities relating to Pillar Two taxes. However, entities must explicitly disclose that they have applied this exception.