24 August 2011
Due to difference of treatment as per IT Act and as per accounts,some timing differences will arise.Those differences may lead to asset or liability.Tax on difference is booked in accounts as deffered tax amount.
24 August 2011
As rightly said by Kumar Babu Deferred Tax Asset [DTA] & Deferred Tax Liability [DTL] arise due to timing difference.
Such timing differences may arise due to transactions covered under section 43B ie. in books of account the P&L account will show profit after debited such expense on accrual basis while as per Income Tax such expense shall be deductible only after actual payment. This will lead to timing difference for eligibility for A/c and IT Act and hence "Profit taxable under head PGBP" shall be different than in books of a/c.
I hope this helps you....
Same way in case of depreciation due to depreciation rate & calculation difference for depreciation calculation as per Income Tax & as per Companies Act asme issue will arise.
Such timing difference will get settled in later years for which we create DTA/DTL.
DTA arises when Profit as per books of A/c is less than profit under head PGBP as per Income Tax due to such transactions.
While
DTL arises when Profit as per books of A/c is more than profit under head PGBP as per Income Tax due to such transactions.
Such DTA/DTL for shall be applied on difference between profit as per books of a/c & as per PGBP under IT Act @ 33.2175% for AY 2011-12.
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