Deferred Tax Liability/Asset

This query is : Resolved

Devendra (Querist)
Follow

10 May 2010 Can anybody explain me how Deferred Tax Liability/Asset arises? How is it calculated?

Thank You,
Regards,
Devendra

Rahul Gupta

Rahul Gupta (Expert)
Follow

10 May 2010 There may be difference how certain items of expenditure are treated for tax purposes and how a company actually treats them in its accounts.
For example, tax laws allow a 100% depreciation in the year of acquisition of certain assets. But a company may actually write off the depreciation over a larger number of years in its accounts.
In other words, the company may charge depreciation at lower rates than allowed under tax laws. Or it may use a different method of charging depreciation. Tax laws may allow a company to deduct certain expenses in full in a single year, but it may phase out the charge over a number of years.
In these cases, a company ends up postponing part of its tax liability on this year's profits to future years. This is because, in the current year, its profits for tax purposes would be lower than the profits computed for accounting purposes. Under such circumstances Deferred tax liability arises.
In exactly opposite circumstances where the tax is paid in excess but the expenditure is allowed subsequently, Deferred tax Asset results.

Also, you can the check the files section for various files on Deferred Taxes and liabilities.

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

Summarize this with AI

ChatGPT Perplexity Claude Google AI Grok

Similar Resolved Queries

Unanswered Queries

Popular
Recent

Trending Online Classes

Direct Tax Laws & International Taxation May 26,Sept 26 & Jan 27

CA Arvind Tuli

Enroll Now
Audit Fast Track Recorded Batch For May 26,Sept 26 & Jan 27

CA Aarti Lahoti

Enroll Now
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English

CA Bhanwar Borana & CA Shubham Keswani

Enroll Now

view all classess

Meet our CAclubindia PRO Members

cgagroshg cgagroshg

venkanna setty

Jayaram Bramhajosyula

NITHIN GEORGE

DHRUV PATEL

Subscribe Now

Deferred Tax Liability/Asset

Similar Resolved Queries

Trending Online Classes

Meet our CAclubindia PRO Members

Quick Links

Browse by Category

Latest Job Openings

Article Assistant

CA Final

Accountant

GST CONSULTANCY

GST CONSULTANT