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deffered tax assests , defferad tax liabilaty

Muralee (16 Points)

10 May 2007

please give a detailed explanation about deffered[color=red][/color] tax assest and deffer ed tax liability

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Yashwanth Jain (70 Points)
Replied 10 May 2007

When the amount of profit calculated as per income tax act is more when compared to that of companies act we create defered tax liability(to be shown under provisions)and viceversa(deffered tax asset)Ex take depreciation, the depreciation as per income tax will be generally be more when compared to depreciation under companies act so say 18000 is dep as per incometax act and 10000 is dep as per companies act then for the balance 8000 deferred tax liability arises so we will compute tax on Rs.8000 ie..,30%+10%+2%(indian comp) ie 8000(33.66%) the amount which we get by this computation will be the provision for deferred tax liability to be shown under provisions, in balance sheet it has to be shown before secured loans,similarly if in the coming year deferred tax asset arises ie,dep as per comp act is more than income tax act , say 18000 as per companies act and 10000 as per income tax on the balance 8000(33.66%(tax for indian companies) the amount arrived will be deducted from liability created earlier and the balance if any will be shown after investments in Bal sheet and in p&l account it will be added(amount remaining after deducting from d.t.l) this is due to timing difference.

(Guest)

Sir, Please Give the defination of Deffered Tax Asset & Liability. When the calculation would be made?, How and When to Calculate the Deffered tax Asset or Liability? Please do needful. Thanks

(Guest)

when there is lossess & Unabsorbed depreciation then Deffered Tax assets is created , If there is Profit but Book profit is more than profit taken for Income Tax act due to excess depreciation available as per It act then such liability which will be reversed in future Years will reflect as a Deffered Tax liability.

Both can be created taking the two things in to matter

1) Timing Difference

2) Permanent Difference