Deferred Tax

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Odujinrin Oyekanmi (Querist)
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19 July 2009 Dear Sir,

I would like to know what deferred tax is all about.

I would also like to know how to calculate deferred tax manually and which software can be used to calculate deferred tax.

Thanks.

odujinrin oyekanmi

Sanjeev Kumar Varshney

Sanjeev Kumar Varshney (Expert)
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19 July 2009 Dear, Odujinrin

The Basic Objectivec of AS-22 is that the tax should recognized on Accrual basis rather than liability to pay basis.

And the Broadly we can say the Deffered tax is the difference of = tax on accrual basis - tax on liability to pay basis.

manually first you have to compute your Accounting income and your taxable income and if there is a difference between these, because of timing difference than you have to calculate the deferred tax.

Thanks
Sanjeev

G.GANESH

G.GANESH (Expert)
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19 July 2009 Dear Odujinrin

Mr. Sanjeev has explained the concept of deferred tax clearly. One have have the clear understanding of timing differences and permenant or non-reversing differences to enable to calculate the deferred tax. Depreciation being calculated at different rates under income tax and Companies Act there would be timing diferences with either of the depreciation reversing at a later date. So the difference between both would result in a Deferred TAx liability or asset.

I do not know whether a software exsists for the same. In most of the cases it is calculated manually.