Calculation of Deferred Tax Asset

saikrishnateja

articleship

17 Points Joined November 2014

Hello sir,

Please explain in first method what to recognise in P&L and what shall be shown in Balance sheet

santosh kumar panda

CA

51 Points Joined November 2014

What is the purpose of providing Deferred tax

Keyur Shah CA

2 Points Joined February 2018

Kinldly Explain How can i Calculate DTA/DTL by using Balance sheet approch For Gratuity??

Siddharth Goel

Chartered Accountant

3031 Points Joined June 2016

Hi,

By Computing differences in Gratuity allowable/payable as per IT and companies Act.

*COMPUTATION OF DEFERRED TAX*	Amount (Rs.)
As per Accounting Standards-22
TIMING DIFFERENCES
Gratuity allowable/payable as per Income Tax Act v/s Companies Act
Gratuity allowable/payable as per IT act	25,000,000
Gratuity allowable/payable as per Companies Act	33,000,000
Difference	8,000,000
Tax thereon @ 30.9%	2,472,000
Deferred Tax Liability since AI >TI	2,472,000
Deferred Tax Asset of Last Year	257,600
*Adjusted Deferred Tax Liability*	2,214,400

In the above example, Gratuity allowable/payable as per IT is less than Gratuity allowable/payable as per companies act hence profit as per income tax is less than accounts. So deferred tax liability of Rs. 24,72,000 will be created in books. Since last year we already have DTA, so this liability is adjusted with last year asset and only deferred tax liability is Rs. 22,14,400 charged in profit and loss account, but full Rs. 24,72,000 will be shown in balance sheet.

You can follow any one of the method, but once you started following one method don’t change it in next year, otherwise it will give incorrect results.

Also, you can follow the link mentioned below by the IT Department which is quite unique and simple to apply:

https://www.incometaxindia.gov.in/Pages/tools/deferred-tax-calculator.aspx