AS 22 Amendment 2026: No Deferred Tax on OECD Pillar Two Global Minimum Tax, New Disclosures for Indian Companies

The Ministry of Corporate Affairs (MCA) has amended Accounting Standard (AS) 22 to deal with the OECD Pillar Two global minimum tax, through the Companies (Accounting Standards) Amendment Rules, 2026, notified by G.S.R. 169(E) dated 10 March 2026. The change matters to any Indian company that is part of a large multinational group: the AS 22 amendment introduces a mandatory exception so that companies do not recognise deferred tax assets or liabilities arising from Pillar Two income taxes, while requiring specific new disclosures instead. If you prepare financial statements under the Companies (Accounting Standards) Rules, 2021, this is the accounting rule you need to apply for the current financial year.

Quick Summary: Key Takeaways

• What: The Companies (Accounting Standards) Amendment Rules, 2026 (G.S.R. 169(E), 10 March 2026) amend AS 22, “Accounting for Taxes on Income”, to address the OECD Pillar Two Model Rules (the global minimum tax).
• Core rule: A mandatory temporary exception: companies must NOT recognise, and must NOT disclose information about, deferred tax assets and liabilities related to Pillar Two income taxes.
• New disclosures: New paragraphs 32A to 32D require companies to state that they have applied the exception, and to separately disclose current tax expense or income relating to Pillar Two income taxes.
• Who: Companies that follow AS under the 2021 Rules (that is, non-Ind-AS companies), typically those inside a multinational enterprise group with consolidated revenue at or above the EUR 750 million Pillar Two threshold.
• Relief: Small and Medium Sized Companies (SMCs) are exempt from the enhanced Pillar Two disclosure requirements. Companies applying Ind AS are covered by a parallel amendment to Ind AS 12.

What the AS 22 Amendment for OECD Pillar Two Actually Does

Pillar Two is the OECD/G20 global minimum tax framework, designed to ensure that large multinational groups pay an effective tax rate of at least 15 percent in every jurisdiction where they operate. Where the local effective rate falls below 15 percent, a top-up tax becomes payable, often collected through a Qualified Domestic Minimum Top-up Tax (QDMTT) in the source country or through the Income Inclusion Rule at the parent level.

The accounting problem is this: if companies were required to apply normal deferred tax accounting to Pillar Two top-up taxes, they would have to estimate future top-up liabilities across jurisdictions and periods, producing figures that are both extraordinarily complex to compute and potentially misleading to readers of the financial statements. Standard setters worldwide concluded the sensible answer is to switch off deferred tax accounting for Pillar Two, and to compensate with targeted disclosure. That is exactly what the AS 22 amendment does for Indian companies on the AS framework.

Element	Position after the amendment
Deferred tax on Pillar Two income taxes	Mandatory exception: do not recognise deferred tax assets or liabilities, and do not disclose information about them
Current tax on Pillar Two income taxes	Recognised and separately disclosed as current tax expense or income
Disclosure	New paragraphs 32A to 32D added to AS 22
SMC relief	Small and Medium Sized Companies exempt from the enhanced Pillar Two disclosures

The New Disclosures Under Paragraphs 32A to 32D

The amendment inserts a new disclosure block into AS 22. In substance, an affected company is expected to make clear the following in its financial statements:

• Application of the exception: a statement that the company has applied the mandatory exception from recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes.
• Current Pillar Two tax: separate disclosure of the current tax expense or income arising from Pillar Two income taxes, so that readers can see the top-up tax impact for the period.
• Exposure information: qualitative and quantitative information that helps users understand the company’s exposure to Pillar Two income taxes, which can include the jurisdictions and profits affected and the expected impact on the effective tax rate.

This mirrors the international approach. The IFRS Foundation amended IAS 12 for the same purpose, and MCA has separately amended Ind AS 12 so that Indian companies on the Ind AS framework follow the parallel path. The AS 22 amendment brings the non-Ind-AS population into line, so that the treatment is consistent regardless of which accounting framework a company uses.

Who Is Affected

Indian subsidiaries and members of large MNE groups

The practical audience is Indian companies that sit inside a multinational enterprise group meeting the Pillar Two scope (broadly, groups with annual consolidated revenue of EUR 750 million or more in at least two of the four preceding years). Their finance teams must apply the deferred tax exception and build the new disclosure into the notes to accounts.

CFOs, controllers and auditors

For a busy CFO, the message is simple: do not attempt to book deferred tax for Pillar Two, and do build the disclosure. For the auditor, the focus shifts from testing a deferred tax computation to verifying that the exception is correctly applied and that the current-tax and exposure disclosures are complete. This is a disclosure-and-judgment area, not a numbers-heavy provisioning exercise.

Small and Medium Sized Companies

SMCs, as defined under the accounting standards framework, are exempt from the enhanced Pillar Two disclosure requirements. Most purely domestic companies well below the Pillar Two threshold will have no Pillar Two income taxes to account for in the first place, so for them the amendment is a non-event in practice. The obligation bites for members of in-scope global groups.

Compliance Checklist

1. Determine whether your company is part of an MNE group within Pillar Two scope (EUR 750 million consolidated revenue threshold).
2. Confirm your reporting framework: AS under the Companies (Accounting Standards) Rules, 2021, or Ind AS (which follows the parallel Ind AS 12 amendment).
3. Do not recognise deferred tax assets or liabilities for Pillar Two income taxes; apply the mandatory exception.
4. Identify and separately measure the current tax expense or income relating to Pillar Two (for example any QDMTT or top-up tax for the period).
5. Draft the notes to accounts to cover paragraphs 32A to 32D: state the exception, disclose the current Pillar Two tax, and give exposure information.
6. If you qualify as an SMC, confirm the disclosure relief and document that assessment.
7. Coordinate with the group tax function so the accounting disclosure and the group’s Pillar Two computation are consistent.

Frequently Asked Questions

Does the AS 22 amendment mean companies pay no Pillar Two tax?

No. The amendment is about accounting, not liability. Any Pillar Two top-up tax that is actually payable is still recognised as current tax and disclosed. What changes is that companies do not book deferred tax assets or liabilities for Pillar Two income taxes.

Which companies must apply the new AS 22 rule?

Companies that prepare financial statements under the Companies (Accounting Standards) Rules, 2021 (the non-Ind-AS population), and that have Pillar Two income taxes because they belong to an in-scope multinational group. Companies on Ind AS follow the equivalent amendment to Ind AS 12.

What is the deferred tax exception?

It is a mandatory temporary exception under which a company neither recognises nor discloses information about deferred tax assets and liabilities related to Pillar Two income taxes. It removes the need to project complex, jurisdiction-by-jurisdiction top-up tax positions into deferred tax figures.

Are Small and Medium Sized Companies covered?

SMCs are exempt from the enhanced Pillar Two disclosure requirements. In any case, a company outside an in-scope global group will typically have no Pillar Two income taxes to disclose.

How does this compare with the international standard?

The AS 22 change follows the same design as the IFRS amendment to IAS 12 and the Indian amendment to Ind AS 12: a mandatory exception from deferred tax accounting for Pillar Two, paired with targeted disclosures. This keeps Indian reporting consistent with the global approach.

The Bottom Line

The Companies (Accounting Standards) Amendment Rules, 2026 give Indian AS-framework companies a clean, internationally aligned answer to a genuinely hard accounting question. Do not recognise deferred tax for Pillar Two income taxes; do recognise and disclose the current Pillar Two tax; and add the paragraph 32A to 32D disclosures. For most domestic companies this is a non-event, but for Indian members of large global groups it is a real change to the notes to accounts that should be built into this year’s close.

For related corporate and tax reading, see our analysis of the Corporate Laws (Amendment) Bill 2026, our guide to the Income-tax Rules 2026 allowance changes, and our explainer on RBI’s new ECB rules for foreign borrowing.

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Working out whether your company is in Pillar Two scope and how to present the AS 22 or Ind AS 12 disclosures? Tax Update India can help you assess the position and get the notes to accounts right. Book a quick call to talk it through.

Disclaimer: This article is for general information only and does not constitute legal, tax, accounting, or professional advice. The primary MCA gazette is the authoritative source; verify the exact text, applicability dates, and disclosure requirements of the Companies (Accounting Standards) Amendment Rules, 2026 (G.S.R. 169(E) dated 10 March 2026) against the notification before acting, and consult a qualified professional. Source: MCA Companies (Accounting Standards) Amendment Rules, 2026, G.S.R. 169(E) dated 10 March 2026 (mca.gov.in), corroborated across multiple professional sources; retrieved 10 July 2026.