Deffered tax
This query is : Resolved
16 October 2011
What is a deffered tax? & how it will
reflect in final accounts.
reflect in final accounts.
CA SUMiT PATWARi
(Expert)
16 October 2011
Deferred tax is computed to reconcile the tax provsion as per the income tax act and as per accounts.
When we compute income tax liabiility we take into account the income tax provisions. Hence we take depreciation as per income tax act istead of depreciation as per accounts, we give effect of amounts to be allowed as deduction on payment basis, etc.
Hence we provide for theses differences in our books of accounts (only for those arisiing on account of timing differences) as deferred tax asset/liability.
DTA arises if if have been allowed less amount as deduction in IT act than against provided in accounts. This disadvantage on account of timing difference can be claimed in future years in IT Act. Hence we recoginse an asset.
DTL arises when we have have got more deduction in computing taxable income than as provided in books of accounts - like deprection.
When we compute income tax liabiility we take into account the income tax provisions. Hence we take depreciation as per income tax act istead of depreciation as per accounts, we give effect of amounts to be allowed as deduction on payment basis, etc.
Hence we provide for theses differences in our books of accounts (only for those arisiing on account of timing differences) as deferred tax asset/liability.
DTA arises if if have been allowed less amount as deduction in IT act than against provided in accounts. This disadvantage on account of timing difference can be claimed in future years in IT Act. Hence we recoginse an asset.
DTL arises when we have have got more deduction in computing taxable income than as provided in books of accounts - like deprection.
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