Accounting for advance tax

My Company's MAT liability is 700 lakh and Tax liability as per IT act is 600 lakh. So obviously,  we have to pay MAT for 2008-09.

During the year we have paid advance tax 200 lakh and made provision for 500 lakh. both the items debited to P&L account.

1) Is it wrong to debit 200 lakh advance tax to P&L account? 

My collegue argues that total Rs.700 lakh has to be shown as IT provision and Rs.200 lakh paid has to be shown as current asset.

We have Balance 500 lakh in provision which we will pay before assessment.

2) Since we are paying MAT, we are eligible for Rs.100 lakh (700-600)MAT credit.

What entries have to be passed for MAT credit and when these entries have to be made? In current year or in the year when we avail MAT credit.

Please clear my doubt ASAP.

 

 

 

Replies (2)

 for ur 1st query...

P/L will be Dr. by Rs.700lakh as provision for IT & Rs.200 lakhs will be shown  in assets side of B/S as Advance tax paid.

for ur 2nd query...

no extra entry req. for mat as Rs700 lakh is as per MAT,the credit RS100 lakh which will be given in subsequent year or it will get accumulated depending upon the IT for the next yr.

 

i need Advance tax calculator in excel format

also wants to know tds paid treatement for calculation of advance tax?

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