Deffered Tax Liability

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This query is : Resolved

G.Manjusha (Querist)

05 May 2010 Is anybody explian why deffered tax paid and what is the procedure for calculation of deffered tax? how it is paid? is it required that every pvt ltd and public ltd company must pay this deffered tax to gov.?

taxindiaconnect

taxindiaconnect (Expert)

05 May 2010 Deferred tax liability / assets is a method for recognising any future tax liability or assets arising due to any temporary differences arising between books and tax books. A very simple and most prevalent example may be a temporary difference in tax liability as per books and tax is depreciation rates due to which the tax liability of the current year may be low due to higher charge of dep. as per IT Act. However this may reverse in future and result in a higher tax liability. By way of deferred tax an the this future liability is recognised in books in current year. Deferred tax assets arises where an expenditure is disallowed in computation and is charged off in books in the year one itself. The deferred tax assets is recognised only if there is a virtual certainty of availing such assets in near future other wise ignored.

Deferred tax is not required to be paid, it only a book entry.

Rahul Gupta

Rahul Gupta (Expert)

05 May 2010 Agreed with Mr Rajesh.
Deferred tax is not to be paid , it is only an adjustment entry in the Books. The tax to be paid is the Tax computed as per the IT Provisions.

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