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CMA Final · Direct Tax Laws and International Taxation · Income Computation and Disclosure Standards (ICDS)

Under section 57 of the Income-tax Act, 2025, which method applies to profits from a contract for providing services that is expected to last 60 days?

The project completion method applies. Section 57(2)(a) requires it for a service contract whose duration is not more than ninety days, and a 60-day contract qualifies. The straight line method is reserved for indeterminate acts over a specified period, and percentage of completion is the general rule.

  1. APercentage of completion method
  2. BStraight line method
  3. CProject completion methodCorrect
  4. DCash receipts method

Explanation

Section 57(2)(a) prescribes the project completion method where the service contract duration is not more than ninety days. A 60-day contract falls within this. The straight line method applies only to contracts involving an indeterminate number of acts over a specified period.

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