Treatment of income tax paid

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

26 September 2015 A pvt limited company pays an income tax of Rs. 5.27 lakhs for the financial year 2013-14. While finalising the returns for the year 2014-15 how to treat this tax paid? Should it be debited to profit and loss account and then add it back to the net profit and pay tax on this amount? Or can it be transferred to the general reserve? Can the experts clarify this matter?

Amol S Joglekar

Amol S Joglekar (Expert)
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26 September 2015 The provision is created and put under current liability and the income tax paid is put under current asset. This continues till the final aasessment order is received from the incme tax department, when the entries are knocked off against each other. The difference, if any, is credited/debited to reserve.

Querist : Anonymous

Querist : Anonymous (Querist)

26 September 2015 Thank you sir. so i understand that the income tax paid need not be added to the profit earned. and no income tax need to be paid on the income tax paid. i was under the impression that income tax paid is not a deductible expenditure.

Amol S Joglekar

Amol S Joglekar (Expert)
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27 September 2015 Your impression is correct. Income Tax paid is NOT an allowable/deductible expenditure. The same is disallowed while preparing the computation of income under income tax.

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