Deferred tax liability

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Vaibhav

Vaibhav (Querist)

10 November 2013 can someone explain in simple terms what is deferred tax liability??

CA Pallav Singhania

CA Pallav Singhania (Expert)

10 November 2013 Because there are differences between what a company can deduct for tax and accounting purposes, there will be a difference between a company's taxable income and income before tax. A deferred tax liability records the fact that the company will, in the future, pay more income tax because of a transaction that took place during the current period, such as an installment sale receivable.

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https://www.caclubindia.com/articles/meaning-of-deferred-tax-liability-asset-in-simple-words-13385.asp

VAMSI ASSOCIATES/S.PHANI RAJ

VAMSI ASSOCIATES/S.PHANI RAJ (Expert)

10 November 2013 deferred tax liability/asset can be created in books of accounts for a private/public limited companies under companies act only

it is a timing difference between depreciation provided as per income tax act and companies act (ex. difference between income tax act and companies act * companies income tax rate 30.9 %)
income tax act depreciation = 50000
companies act depreciation = 70000
deferred tax liability/asset is = 50000-70000* 30.9%

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