AS 22 Amendment 2026: Understanding India’s Adoption of OECD Pillar Two Reporting Requirements

The Ministry of Corporate Affairs (MCA) has issued the Companies (Accounting Standards) Amendment Rules, 2026, introducing significant changes to Accounting Standard (AS) 22 – Taxes on Income. These amendments integrate key aspects of the OECD Pillar Two global minimum tax framework into India’s accounting environment, impacting how enterprises report tax obligations and disclosures. The changes are aimed at improving transparency and aligning Indian financial reporting with global tax reforms.

1. Background: Why Pillar Two Matters

Pillar Two is part of the OECD’s global tax reform initiative designed to ensure that large multinational enterprises pay a minimum effective tax rate, regardless of where they operate. As countries begin implementing these rules, organisations must adapt their accounting and financial reporting practices to reflect the impact of these new tax laws.

The Indian government has now addressed this need by amending AS 22 to outline how companies should treat taxes arising from Pillar Two legislation.

2. New Paragraph 2A: Defining Scope and Introducing a Key Exception

One of the most important changes is the insertion of Paragraph 2A into AS 22. The amendment clarifies that AS 22 applies to taxes arising from any law enacted or substantively enacted to implement the OECD Pillar Two model rules, including Qualified Domestic Minimum Top up Taxes (QDMTTs).

However, the amendment simultaneously introduces a critical departure from traditional accounting treatment:
Enterprises must neither recognise nor disclose deferred tax assets or liabilities related to Pillar Two income taxes.

This exception acknowledges the complexity and unpredictability associated with minimum top up taxes and ensures that companies are not burdened with estimating deferred tax positions that may lack reliability.

3. New Disclosure Requirements: Paragraphs 32A–32D

Beyond deferred tax treatment, the amendment introduces a comprehensive new disclosure framework. These additions are designed to give users of financial statements clarity over how the new tax rules affect the enterprise.

3.1 Paragraph 32A — Disclosure of Applying the Exception

Companies must clearly disclose that they have applied the exception to recognising and disclosing deferred tax related to Pillar Two income taxes. This ensures transparency for stakeholders reviewing the financial statements.

3.2 Paragraph 32B — Current Tax Disclosure

Enterprises must now separately disclose their current tax expense or income arising from Pillar Two income taxes. This helps distinguish the immediate tax impact of the new regime from regular tax obligations.

3.3 Paragraph 32C — Disclosures When Legislation Is Enacted but Not Effective

In periods where Pillar Two legislation has been enacted or substantively enacted but is not yet in force, companies must disclose any known or reasonably estimable information that helps users understand their expected exposure. This requirement bridges the gap between legislative adoption and actual implementation.

3.4 Paragraph 32D — Qualitative and Quantitative Exposure Details

To support Paragraph 32C, companies must provide:

• Qualitative disclosures, explaining how Pillar Two may affect them and which jurisdictions may trigger exposure.
• Quantitative disclosures, such as the proportion of profits likely covered by the minimum tax or how the effective tax rate would have changed if Pillar Two rules were already active.

If estimates are not reasonably determinable, the company must state this and disclose progress made in assessing exposure.

4. Relief for Small and Medium?Sized Companies

Recognising the burden on smaller entities, the amendment provides relief for Small and Medium Sized Companies (SMCs).
SMCs are not required to comply with the detailed disclosure requirements under Paragraphs 32C and 32D. This exemption helps reduce unnecessary reporting obligations for companies with limited international exposure.

5. Effective Dates and Transition Requirements

The amendment sets out clear timelines for implementation:

Immediate and Retrospective Application

The following must be applied immediately:

• Paragraph 2A (deferred tax exception)
• Paragraph 32A (disclosure of applying the exception)
   

Applicable from 1 April 2025

The following additional disclosure requirements will apply to annual reporting periods starting on or after 1 April 2025:

• Paragraph 32B
• Paragraph 32C
• Paragraph 32D
   

Interim Reporting Relief

Companies are not required to provide the new disclosures for interim reporting periods ending on or before 31 March 2026.

6. What These Amendments Mean for Companies

The 2026 update to AS 22 marks a major step toward aligning India’s reporting standards with global taxation frameworks.

Key impacts include:

• Removal of deferred tax recognition for Pillar Two–related taxes.
• Requirement to disclose current tax impacts separately.
• Greater emphasis on transparency regarding exposure to global minimum tax rules.
• Need for companies with multinational operations to assess and report potential tax consequences across jurisdictions.
• Reduced disclosure obligations for SMCs.

These changes strengthen financial reporting integrity and ensure Indian businesses remain aligned with evolving global tax standards.

The amendments to AS 22 under the Companies (Accounting Standards) Amendment Rules, 2026 represent a major milestone in India’s alignment with international tax reform. By introducing a clear exception for deferred tax, while simultaneously enhancing disclosure requirements, the Ministry of Corporate Affairs has balanced practicality with transparency.

Enterprises affected by Pillar Two rules must now prepare for enhanced reporting expectations, improved data gathering across jurisdictions, and a more globally integrated approach to tax compliance. As global minimum tax frameworks continue to evolve, these amendments ensure that Indian financial reporting remains clear, consistent, and internationally relevant.