25 August 2009
Deferred tax is arise on account of timing permanent diff. on tax as per accounting profit & tax on taxable income as per income tax provisions.
Eg : Lets assume i have book profit of 150000.00. There is one disallowance u/s 43B of Rs. 50000.00. So the deferred tax working would be like this:
Tax on accounting profit is Rs. 45000.00 (@ 30% on 1.5L)
Please note we will not make any deferred asset or liability for permanent diff. arise to @ 30%
Deferred tax asset on account of disllowances Rs. 15000.00 (@ 30% on 50K)
Tax as per income tax act : 60000 (150000+50000)@ 30%
We will pass two entry in the books of accounts.
1. Provision for Income tax liability Income tax account Dr. 60000.00 To Provision for Taxation A/c Cr. 60000.00
2. Deferred tax asset Deferred Tax Asset A/c Dr 15000.00 (In Current asset gr. in tally) To Deferred tax income Cr. 15000.00 (in Misc income in P& L A/c)
Please note we will not make any deferred tax asset or liability for permanent differences as the same will be able to reverse in the next year.
CAclubindia
