Deferred Tax

Save Share

Join Us Follow Us Add as Source

This query is : Resolved

Report Follow Query Ask a Query

Gayathri

Gayathri (Querist)
Follow

16 December 2009 What is Deferred Tax?

CS Snehal

CS Snehal (Expert)
Follow

16 December 2009 Deferred tax is an accounting concept, meaning a future tax liability or asset, resulting from temporary differences between book (accounting) value of assets and liabilities and their tax value, or timing differences between the recognition of gains and losses in financial statements and their recognition in a tax computation.

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
Follow

16 December 2009 You see that there is a difference in profit shown by P & L a/c and the profit determined by the Computation of Income prepared for Income-Tax purpose.

So if the present rate of Income tax is applied to book profits then definitely it will be more than what has been determined in the income tax.

Since you have paid less as per book results; it means this liability is to be raised in future.

This is Deferrement of Tax (Liability)

Opposite is Deferred Tax Asset

CA SIDHARTH HIRALAL PATNI

CA SIDHARTH HIRALAL PATNI (Expert)
Follow

16 December 2009 Deferred tax is the effect due to timing difference.
It is calculated by comparing profit calcultated as per tax law and as per company law.

For more details u can refer to AS 22.

Gayathri

Gayathri (Querist)
Follow

18 December 2009 Can u explain deferred tax with an example? & when it will become nil?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now