Deferred tax rate
This query is : Resolved
04 October 2017
A Company is having turnover of less than Rs. 5 Cr. in FY 2014-15 as well as 2015-16. So while computing deferred tax for F.Y 2016-17 which is the relevant tax rate? Is it 29% (ie the income tax rate for A.Y 2017-18 given in Part I of Finance Act 2017) or whether it is to be calculated at 25% (ie the Advance Tax Rates for A.Y 2018-19 given in Part III of Finance Act 2017)? Please advice.
04 October 2017
Income tax rate for DTA /DTL is 29 percentage
04 October 2017
Sir, why is 25% (Tax rate for A.Y 2018-19) not considered as substantive rate for calculation of DTA/DTL even when it is clear that the company has to pay tax in future @ 25%?
04 October 2017
It is to be calculated at 25% (ie the Advance Tax Rates for A.Y 2018-19 given in Part III of Finance Act 2017).
04 October 2017
25% cannot be considered since it is not the tax rate or substantially enacted tax rate on the balance sheet date. Inference - clause 21 of AS 22.
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04 October 2017
Finance Act Can it not be inferred as substantially enacted.
04 October 2017
Sir,
As per AS-22, clause 21, deferred tax assets and liabilities should be measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Substantive rate is defined in the AS, thus the general definition can be taken as substantively enacted tax rate is the rate that isn’t yet come into effect, but is fully expected to be in effect soon.
Moreover the tax rate @ 25% was brought in Finance Act, 2017, which was published in the Gazette of India on 31.3.2017. The Balance Sheet is prepared on 31.3.2017. So can 25% be treated as the substantive rate?
As per AS-22, clause 21, deferred tax assets and liabilities should be measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Substantive rate is defined in the AS, thus the general definition can be taken as substantively enacted tax rate is the rate that isn’t yet come into effect, but is fully expected to be in effect soon.
Moreover the tax rate @ 25% was brought in Finance Act, 2017, which was published in the Gazette of India on 31.3.2017. The Balance Sheet is prepared on 31.3.2017. So can 25% be treated as the substantive rate?
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04 October 2017
Sorry, please read the above query as "Substantive rate is not defined in the AS, thus the" in place of "Substantive rate is defined in the AS, thus the "
04 October 2017
I agree with you that substantively enacted tax rate is the rate that isn’t yet come into effect, but is fully expected to be in effect soon. Moreover the tax rate @ 25% was brought in Finance Act, 2017, which was published in the Gazette of India on 31.3.2017.
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