deferred tax liability
This query is : Resolved
CA SANJAY MUKHERJEE
(Expert)
27 September 2009
Deferred tax is the timing difference of some items of Final Accounts as per Company Laws and Income tax Act.
e.g Your Depreciation as per Co's Act is not same as depreciation as per I.Tax Act.
If you are claiming higher dep as per I.Come Tax act it creates a timing diffirence as it would result in a lower dep claim as per I.Tax act in future.
Now in current year you are paying lower tax for higher de claim as per I.Tax and in a future year you have to pay higher tax. It results in a Deferred tax liability.
Thus you have to identify the items fir which your Accounting Profit/Loss differs from your Taxable profit/loss. Now some reasons pay be permanent i.e. those difference will not reverse in future and you need not create any provision for those. Only those items which may be reversed in future needs provisioning.
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e.g Your Depreciation as per Co's Act is not same as depreciation as per I.Tax Act.
If you are claiming higher dep as per I.Come Tax act it creates a timing diffirence as it would result in a lower dep claim as per I.Tax act in future.
Now in current year you are paying lower tax for higher de claim as per I.Tax and in a future year you have to pay higher tax. It results in a Deferred tax liability.
Thus you have to identify the items fir which your Accounting Profit/Loss differs from your Taxable profit/loss. Now some reasons pay be permanent i.e. those difference will not reverse in future and you need not create any provision for those. Only those items which may be reversed in future needs provisioning.
You may check the contribution of other experts in the following link.
https://www.caclubindia.com/share_files/files_display.asp?files_id=1525
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