16 December 2009
Deferred tax is an accounting concept, meaning a future tax liability or asset, resulting from temporary differences between book (accounting) value of assets and liabilities and their tax value, or timing differences between the recognition of gains and losses in financial statements and their recognition in a tax computation.
16 December 2009
You see that there is a difference in profit shown by P & L a/c and the profit determined by the Computation of Income prepared for Income-Tax purpose.
So if the present rate of Income tax is applied to book profits then definitely it will be more than what has been determined in the income tax.
Since you have paid less as per book results; it means this liability is to be raised in future.
16 December 2009
Deferred tax is the effect due to timing difference. It is calculated by comparing profit calcultated as per tax law and as per company law.
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