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Johnson Anthonidas

Johnson Anthonidas (Querist)
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05 June 2013 CAN ANY ONE LET ME KNOW THE CONCEPT OF DEFERRED TAX LIABILITY AND ASSET BCOZ OF TIME DIFFERENCE

CA SMR

CA SMR (Expert)
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07 June 2013 DTA-Asset in a company's balance sheet that may be used to reduce any subsequent period's income tax expense.Deferred tax assets Income tax rate applied on the loss as per the IT Act,can be recognised only if there is sufficient evidence that there will be future taxable income against which DTA can be set off.

DTL-Is the Income tax rate applied on the difference between depreciation as per IT act and Co's Act as this difference will be ironed out in future.Deferred tax represents a company's liability for taxes owed that is postponed to future periods. Deferred tax is primarily the result of tax law that allows firms to write off expenses faster than they are recognized and thus create a deferred tax liability. For example, under tax law companies can often depreciate fixed assets at a faster rate for tax purposes than the actual use of the asset would dictate. Theoretically, the resulting difference between income under Generally Accepted Accounting Principles and income for tax purposes sets up a deferred tax liability for the apparent taxes owed to the IT Dept in the future.

e.g

Loss: 4450

Add: Depn as per Co.'s Act 1374

Less: Depn as per IT Act 6600

Loss as per IT Act Rs 9676/-

DTL- Rs 1615/-(IT @ 30.90% 0n the diff between two depn)

DTA-Rs 2990/-(IT on the loss as per Income tax Act)

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