22 October 2011
Deferred tax is governedby AS -22. Deferred tax is the timing difference between Taxable Income and Accounting Income.
Deferred Tax Asset : Where is taxable income is more than accounting income [ accounting income means profit as shown in P&L], the Deferred Tax Asset Arises.
Deferred Tax Liabilities : Where Accounting income is greater than Taxable income then Deferred Tax Liability will arise.
Example :
Profit as per profit & Loss Account 100000 Dep as per Companies act 25000 Allowable Dep as per Income Tax act 40000 Taxable Income [ 100000+25000-40000] 85000 Timing difference is [100000-85000] 15000 Deferred Tax Liability [ 30% *15000] 4500
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