Deferred Tax Liability

If there is a difference in the way certain items of expense are allowed to be treated for tax purposes and how a company actually treats them, DT liability or DT asset arises.

For example, Tax laws may allow 100% depreciation in the case of an assessee in the first year of use in respect of certain assets. But the assessee may actually write off the depreciation over a larger number of years in its financials. The company may charge depreciation at lower rates than allowed under tax laws. Or it may use a different method of charging depreciation.

In the above cases, the assessee will take advantage of the tax provision sooner than it is in actual case and therefore the additional tax advantage will be notionally shown as DT Liability, by debiting the profit and loss account by way of a provision.

In the reverse cases DT assets arise

Hi,

Any one can be sent the format or example of deferred tax liability and assets.

regards

ramesh

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