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Deffered tax

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Nikunj Shiyani

Nikunj Shiyani (Querist)

28 April 2014 sir,, why we needs to create deferred tax liability/asset??, plz give example also.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

28 April 2014 As per accrual concept, to recognize the tax expenses as and when they incurred we need to calculate the deferred tax liability/Asset. profit as per companies act and income tax act always vary, because both acts provisions are different, as same the tax calculation on profit also differ, we need to correct that difference, we need to calculate the deferred tax and account it.

Simple example, Depreciation rates under companies act and Income tax act different. due to this the profit also will vary under both act.for correct those difference, we need to calculate the tax on different amount and recongnise the same

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