Go AD-FREE with CAclubindia Pro and Daily WhatsApp Updates. Subscribe Now!

Deferred Tax Asset and Liability explanation

236 views 2 replies

Anurag Gupta

Service

41 Points Joined April 2021

According to definition, if Current Tax > Tax Expenses, then it is called Deffered Tax Assets

and if Current Tax < Tax Expenses, then it is called Deferred Tax Liability

So, how if Current Tax is more than Tax Expenses it is called an 'Assets'

and how if Current Tax is less than Tax Expenses it is called a 'Liability'

Please explain...

Replies (2)

CA. Sourav Sarkar

Chartered Accountant

24588 Points Joined November 2019

Deferred tax assets is current assets and deferred tax liability is current liabilities but entity should show the net balance of DTA and DTL in balance sheet

When Income Tax libility as per book's of Accounts is more than Income Tax act due to i.e rate of depreciation , then for temporary difference we have to create Deferred Tax liability .
when Income Tax libility as per book's of Accounts is less than Income Tax act due i.e rate of depreciation , then for temporary difference we have to create Deferred Tax Asset.