Modernizing Revenue Recognition in Construction and Service Contracts: Clause 57 of Income Tax Bill, 2025 Vs. Section 43CB of Income-tax Act, 1961

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..... use 57 of the Income Tax Bill, 2025, introduces significant provisions concerning the revenue recognition for construction and service contracts. This clause is pivotal as it delineates the methodologies for computing profits and gains from such contracts, thereby impacting how businesses report their income. The clause is embedded within the broader legislative framework aimed at standardizing re .....

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..... ce contracts be determined using the percentage of completion method. This method recognizes revenue based on the progress of the project, ensuring that income is reported in proportion to the work completed. The clause references income computation and disclosure standards notified u/s 276(2), emphasizing compliance with standardized accounting practices. Sub-section (2): Methods for Service Con .....

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..... not be reduced by incidental income such as interest, dividends, or capital gains, maintaining the integrity of cost reporting. Practical Implications Clause 57 has several practical implications for businesses and stakeholders: * Compliance Requirements: Businesses must adapt their accounting practices to comply with the specified methods, potentially requiring updates to accounting systems .....

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..... ontracts. * Both stipulate that contract revenue includes retention money and that contract costs should not be reduced by incidental income. Differences * Legislative Context: Clause 57 is part of a new legislative framework aimed at modernizing tax laws, whereas Section 43CB was introduced as an amendment in 2018. * Reference to Standards: Clause 57 refers to standards notified u/s 276(2) .....

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