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

Under the Income-tax Act, 2025, for computing business income, how must inventory in the nature of securities that are not listed on a recognised stock exchange be valued?

Unlisted securities held as inventory, and listed ones not regularly quoted, are valued at actual cost initially recognised as per the ICDS. The lower of cost or net realisable value rule applies only to other securities, not to these.

  1. AAt lower of actual cost or net realisable value
  2. BAt actual cost initially recognised as per the ICDSCorrect
  3. CAt net realisable value only
  4. DAt the market value on the last day of the tax year

Explanation

Section 277(1)(iii) requires unlisted securities, or listed securities not quoted with regularity, to be valued at actual cost initially recognised as per the ICDS. The lower of cost or NRV rule applies to other securities under clause (iv), so option A is wrong for unlisted securities.

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