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

Under the Income-tax Act, 2025, a trader holds listed shares as stock-in-trade, and these shares are quoted on a recognised stock exchange with regularity. How is this inventory valued for computing business income?

Listed and regularly quoted securities held as inventory are valued at the lower of actual cost or net realisable value, and the comparison is made category-wise, not security by security. Cost-only valuation applies to unlisted or irregularly quoted securities.

  1. AAt actual cost initially recognised, with no comparison to net realisable value
  2. BAt lower of actual cost or net realisable value, compared category-wiseCorrect
  3. CAt net realisable value in all cases
  4. DAt lower of actual cost or net realisable value, compared for each individual security

Explanation

Section 277 requires securities that are listed and quoted with regularity to be valued at the lower of actual cost or net realisable value. Sub-section (3) requires the comparison to be made category-wise. The option allowing no comparison applies only to unlisted or irregularly quoted securities. Item-by-item comparison is not what the Act prescribes.

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