Differed tax liabilty and asset

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Chinna (Querist)
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19 January 2014 Hello friends, my dobut is differed tax liability is liability for the company or not? example; depreciation as per co. act 20000 depreciation as per it act 50000 difference is 30,000 in my point of view, compamy shows lesser depreciation and higher profit.hence cimpany will pay higher tax now when compared to income tax act.So it is asset or libility? vise-a-versa to differed tax asset? please clarify

Nikhil Kaushik

Nikhil Kaushik (Expert)
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19 January 2014 it is a deferred tax liability

see the difference in dep is 30000, for simplification lets assume tax on the same as 10000

Now the profit as per companies act should be higher by 10000..but the actual payment for tax shall be as per income tax act only...so this 10000 shall be payable in future period...therefore it is a liability..

for a very good understanding of deferred assets and liabilities please refer

https://www.caclubindia.com/articles/meaning-of-deferred-tax-liability-asset-in-simple-words-13385.asp#.UttXnPu6bVI

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