Entry for tax in A/c

1.PROV FOR TAX 08-09 (INDIRECT EXP.)                           Dr. 205000

   PROV FOR INCOME TAX (CURRENT LIA & PROV.)       Cr. 205000

2.  PROV FOR INCOME TAX (CURRENT LIA & PROV.)     Dr. 150000

    ADVANCE TAX                                                                        Cr. 150000

3. NOW BALANCE OF YOUR ADVANCE TAX A/C WILL BE "NIL"

4. BALANCE OF YOUR PROV FOR AX 08-09 A/c WILL BE EQUAL TO YOUR TAX LIABILITY TO BE PAID AFTER ASSESSMENT.

5. IF ANY INTEREST AND/OR PENALTY IS LEVIED ON THE LIABILITY, OPEN A SEPARATE A/C FOR THAT AND DO ENTRY AS FOLLOWS:

    PROV FOR INCOME TAX (CURRENT LIA & PROV.)     Dr. 125000

    INCOME TAX PENALTY 08-09 (IND. EXP.)                      Dr.    5000 (SAY)

                      BANK A/c                                                              Cr. 130000

6. ALTHOUGH THE PENALTY ETC WONT BE AN ALLOWED EXPENXE UNDER IT ACT.

Provision for Taxation Dr 70000

Income Tax Paid   Dr     205000

To Advance Tax        cr       150000

TO Bank                     cr        125000

can any one let me know whether I am right or gone wrong somewhere in this transaction

Ritesh  sir my entry is wrong  ? can u comment on the same

SIVARAM,

WHAT IS THE HEAD OF INCOME TAX PAID A/C?

Income Tax Paid Account is a short  provision for  the previous financial year which i say as Income tax paid account that head of account is wrong ? it should be provision for taxation account

SIVARAM

THAT MEANS PROV FOR TAXATION A/C IS DEBITED WITH 275000/-.

RIGHT?

SIVARAM,

THIS WILL MAKE PROV FOR TAXATION A/C AS REMAINDER WHICH SHUD NOT BE.

understood sir thanks for correcting me

Ritesh Sir In Ist entry

if prov, for Tax is considered as indirect exp. then it will be trasferred to p&l a/c which will show less profit of c.y.

Sivaram sir Bal. in Prov for Tax . what will be the treat ment of it?

ABHAY,

THE PROFIT WILL NOT BE AFFECTED. WHILE CALCULATING PROFIT , IT WILL BE SHOWN BELOW THE LINE AFTER CALCULATING NET PROFIT AS IT IS NOT ALLOWED UNDER IT ACT.

 hi Ritesh

As per ur calculation

Opening Bal in Provision for tax                          70000

Transfer in Ist entry                                                205000

2nd entry                                                                (150000)

Net Bal is 125000 which is not equal to the total liability which is Rs 275000/-

Also, till the time the assessment is over we have to maintain the Advance Tax account as well as the provision account (which is normally equal) and is written off only after assessment. Here even the opening balance differs, the reason for  which is to be looked into.

Regards 

CA Neethu

Abhay

There will be no balance standing in Provison  for Tax if you follow the entries given by Mr Ritesh Kothari

Mr Neethu Joy construct provision account correctly rs 70000+205000 in  credits and 150000+125000 in debit