Deferred tax on ROU assets

11 November 2021

If there is any applicability of deferred tax on right of use assets.How the calculations to be done and how it shall be presented.

Reply
Follow
Share

1 Replies

prasad Nilugal ( GST Practitioner & Accounts ) (13183 Points)
Replied 11 November 2021

Yes , Deferred Tax on right to use on asset is applicable ., either deferred tax asset or deferred tax liability .

For example , Company has taken an asset for right to use on lease of Rs 2000000/- for five years , Depreciation will be on SLM -striate Line Method - in equal installment ,and lease rent will be 150000/- per Annam , interest rate is 5% . Tax rate is 30% . Calculation for Deferred Tax as follows . Tax department will not recognize Depreciation because right to use as asset on lease , and allowed Lease rent as deduction .

As per the books As per Tax department

Right to use an asset 2000000 200000

Less -Depreciation 200000

Add- 5% Interest on lease rent 100000

Less - Lease Rent 150000

-------------------- ---------------------

1800000 1750000

Difference 1800000 less 1750000 = 50000/-

Tax 30% on 50000 15000

So 15000 is Differed Tax Asset .

2 Like