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ACCOUNTING FOR 'PROVISION FOR INCOME TAX ' AND REVERSAL OF TEH SAME

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(Querist)
11 January 2008 WHEN SHOULD EXCESS PROVISION FOR INCOME TAX BE REVERSED???? IS THERE ANY TIME CONSTRAINT??? WHAT ARE THE REPURCUSSUINS OF NOT COMPLYING WITH THE SAME???
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Amit

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Amit (Expert)
11 January 2008 Reversal of excess provision for income tax depends on the circumstances when there is entity establishes reasonable assurance that the provision made is excess. Like normally accounts are finalised before final preparation of Return of Income. If at the time of preparation of Return, Provision of tax appears to be excess due to error in calculation or new law coming in after finalisation of account or any other reason, than also excess provison shall be reversed.
It may also happen that during the assessment tax is computed at lower amount, in this case at the time of comepletion of assessment, tax shall be reversed.
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