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Provision for income tax

Arundhati Raychaudhuri (no designation) (340 Points)

31 July 2011

Is it compulsory to create provision for income tax for a partnership firm?

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5 Replies

Keshav (chartered accountant) (286 Points)
Replied 01 August 2011

no its not necessary to provide for taxation in case of partnership firms

CA Vibhash Kumar Sah (Associate Manager) (700 Points)
Replied 01 August 2011

Originally posted by : Arundhati Raychaudhuri
	Is it compulsory to create provision for income tax for a partnership firm?

If u wont, how will be discharge the liability in the name of firm without charging Income tax expenses to P & L

Keshav (chartered accountant) (286 Points)
Replied 01 August 2011

@ ca vibhash- since provision for tax is not neccesary and also since it is not an expense,u can discharge it through p/L aporopriation A/c in a partner profit sharing ratio.same treatment should also be followed when after assessment any additional tax liability is paid.on the other hand,if at all u provide for taxation in p/l A/c,u hav to carry frward each year the amount till final liability is assessed by AO.

Keshav (chartered accountant) (286 Points)
Replied 02 August 2011

If u dont want to make provision, entry would be...partners a/c...dr.......to bank a/c or debit income tax expense in p/l and credit bank , effect in both d cases would b same.(i.e. no need to show tax paid under current asset).Also debiting income tax in p/l does not mean u r making provision. When u debit advance tax(under Current Asset) and credit bank A/c and then provide for tax in p/l,then provision for taxation is made.