Reversal of DTA/DTL

Hi friends

Could anyone of you tell what is the conceptual reason behind reversal of DTA and DTL???

 

Thanks in advance

Replies (4)

when we will receive some benefit in future then we create deferred tax asset. and this asset we show in balance sheet.

And when we receive that benefit in next accounting year then we write off the asset as it is received. this process is called reversal of DTA.

 

So the concept is we have to reverse because DTA/DTL is no more our asset/liability.

 

You can seek further clarification if still any confusion you have in mind.

Originally posted by :Shashi Bhushan
" when we will receive some benefit in future then we create deferred tax asset. and this asset we show in balance sheet.
And when we receive that benefit in next accounting year then we write off the asset as it is received. this process is called reversal of DTA.
 
So the concept is we have to reverse because DTA/DTL is no more our asset/liability.
 
You can seek further clarification if still any confusion you have in mind.
"

Creation of DTA/DTL is required as per AS-22.

When the book profit of the company is more/less than the taxable income, then the additional/Less tax paid on this difference is trf to DTA/DTL respectively.

 

We have to pay the tax on the taxable income as computed under Income Tax Act'1961. But the book profit of the company always differs from the taxable income because of some addition or disallowance under IT Act. The tax on the difference between Book Profit and taxable income is trf to DTA/DTL.

Reversal of DTA/DTL: DTA and DTL both cannot stand together in balance sheet. Either DTA or DTL would reflect in final accounts. If there is DTA in one year and if in the next year DTL is to be created then first DTA would be adjusted and then DTL would be created.

 

Originally posted by :Rahul Jain
" Creation of DTA/DTL is required as per AS-22.
When the book profit of the company is more/less than the taxable income, then the additional/Less tax paid on this difference is trf to DTA/DTL respectively.
 
We have to pay the tax on the taxable income as computed under Income Tax Act'1961. But the book profit of the company always differs from the taxable income because of some addition or disallowance under IT Act. The tax on the difference between Book Profit and taxable income is trf to DTA/DTL.
Reversal of DTA/DTL: DTA and DTL both cannot stand together in balance sheet. Either DTA or DTL would reflect in final accounts. If there is DTA in one year and if in the next year DTL is to be created then first DTA would be adjusted and then DTL would be created.
 
"


 

adjustment of DTA/DTL is not mandatory. its our discretion that we can adjust DTA and DTL and show net balance if both of them are arised due to same governing law(eg. income tax)

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
15 September 2026
Client-site CA associate

Aditya Muley and Co

Mumbai

CA

View Details
Company
09 September 2026
SENIOR AUDITOR & ACCOUNTS MANAGER

Anupam Parashar & Co.

Ghaziabad

CA Final

View Details
Company
27 August 2026
ACCOUNTANT

CHARUPREETI & CO

Noida

Graduate (Any)

View Details
Company
ARTICLESHIP 25 August 2026
CA Article's

Saini Pati Shah & Co LLP

Mumbai

CA Inter

View Details
Company
Featured 12 September 2026
Assistant Manager - Finance & Compliance

Naveen Fintech Pvt Ltd

Kolkata

CA Inter

View Details
Company
09 September 2026
Semi Qualified CA / CA Inter - 2 Groups Cleared

Getmyca Consultant Pvt Ltd

New Delhi

CA Inter

View Details
Company
29 August 2026
Chartered Accountant

Velionit Consulting PVT LTd

Mumbai

CA

View Details
Company
ARTICLESHIP 29 August 2026
Article Assistant

RRPM & ASSOCIATES LLP

Chennai

CA Inter

View Details