KINDLY EXPLAIN ME MAENING OF DTA & DTL IN EASY WORDS.............
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DTA and DTL
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DTA - DEFERRED TAX ASSETS:-
WHEN BOOK PROFIT IS RS. 100 AND PROFIT IS COME RS. 150 AS PER INCOME TAX AND COMPANY HAS TO PAY TAX OF RS. 45 ON PROFIT AS PER INCOME TAX , HENCE COMPANY HAS PAY TAX OF RS. 15 EXTRA ACCRODING TO BOOK PROFIT SO RS. 15 IS CALLED DEFERRED TAX ASSETS.
Hello Dear,
Deffered tax arises due to different treatment of accounts, as per company act and as per income tax act.
we have to maintain our books as per company act but we calculate income tax as per income tax act. so there arise a difference in taxes on income. there r mainly two types of differences, 1) temprary difference 2) permanent difference. deffered tax asset or liablities are created for taken the effect of temprary diff. No treatment r available 4 permanent diff.
if we have paid more tax(amount as per income tax act) than the tax ( amt as per co. act) , it will be deffered tax asset and if we have paid less tax than tax as per co act, then it will be deffered tax liab.
yet any confusion remain, do reply
To simplify, when Depre as per It is less than that of companies act, we are claiming less exp and paying high tax to the extent, creating benefit for future, i.e.DTA.
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