Deffered Tax
This query is : Resolved
22 August 2009
what is the deffered tax and how do we calculate deffered tax explian with example for understanding purpose
22 August 2009
Deferred tax is calculated based on the time difference of expenditure. The measure calculation is based on diff in depreciation as per companies act and income tax act. As in general the depreciation as per I T act remains higher in initial years as compared to depreciation as per comp act. Than on diff of dep, we calculate tax on prevailing rate, which shall be deferred tax liability. If the above position is reversed, than there will be deferred tax assets. e.g. If dep as per comp act is Rs.100, where as dep as per IT act is 150, thus while calculating tax, we shall be allowed Rs.150 as dep, this will reduce tax liability on 50, which we have to pay in future, hence the provision of tax on Rs.50 shall be deferred tax. There are few more such items affecting the calculation.
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