Calculation of Deferred Tax Asset

Page no : 2

jishnu m kumar (student) (21 Points)
Replied 30 August 2016

Balance Of Fixed Assets As per Companies Act	2,613,632.63
Balance Of Fixed Assets As per Income Tax Act	3,781,343.75

Inadmissible expenses
Gratuity and Leave Salary	613,964.00

please calculate deferred tax.

saikrishnateja (articleship) (17 Points)
Replied 05 September 2017

Hello sir,

Please explain in first method what to recognise in P&L and what shall be shown in Balance sheet

santosh kumar panda (CA) (51 Points)
Replied 14 October 2017

What is the purpose of providing Deferred tax

Sasidhar Aruljothi (C.A FINAL) (187 Points)
Replied 11 December 2017

Keyur Shah CA (2 Points)
Replied 21 February 2018

Kinldly Explain How can i Calculate DTA/DTL by using Balance sheet approch For Gratuity??

Siddharth Goel (Chartered Accountant) (3026 Points)
Replied 05 July 2018

Hi,

By Computing differences in Gratuity allowable/payable as per IT and companies Act.

*COMPUTATION OF DEFERRED TAX*	Amount (Rs.)
As per Accounting Standards-22
TIMING DIFFERENCES
Gratuity allowable/payable as per Income Tax Act v/s Companies Act
Gratuity allowable/payable as per IT act	25,000,000
Gratuity allowable/payable as per Companies Act	33,000,000
Difference	8,000,000
Tax thereon @ 30.9%	2,472,000
Deferred Tax Liability since AI >TI	2,472,000
Deferred Tax Asset of Last Year	257,600
*Adjusted Deferred Tax Liability*	2,214,400

In the above example, Gratuity allowable/payable as per IT is less than Gratuity allowable/payable as per companies act hence profit as per income tax is less than accounts. So deferred tax liability of Rs. 24,72,000 will be created in books. Since last year we already have DTA, so this liability is adjusted with last year asset and only deferred tax liability is Rs. 22,14,400 charged in profit and loss account, but full Rs. 24,72,000 will be shown in balance sheet.

You can follow any one of the method, but once you started following one method don’t change it in next year, otherwise it will give incorrect results.

Also, you can follow the link mentioned below by the IT Department which is quite unique and simple to apply:

https://www.incometaxindia.gov.in/Pages/tools/deferred-tax-calculator.aspx