Tax laibility

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what is the meaning deferred tax liability

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Deffered tax liability is a tax liability which is created because of timing difference in reversal of some expenses. for example if you are claiming depreciation at a higher rate(as income tac act depreciation rates are higher than comapnies act) which will make us pay less tax, hence the difference of tax which we would have to pay if we had claimed depreciation as per companies act would be provided as deffered tax liability. opposite for deffered tax asset. DEffered tax liability\asset is provided\created only in case of companies.

Deferred Tax Liability (DTL) -- 

It would be easy to understand it thru an eg.

Suppose u claim 100% depreciation on Scientific Research Assets as per IT Act,1961. And in Accounts u hav claimed say 25.89% depn.

Now at the time of computation u'll get higher depn and consequently ur tax liability will fall. But u've got 100% depn in tax so no further depn in future years.

Next Year again u will claim depn @ 25.89% on those assets. But the same wud not b allowed in Computation. So u will have to pay higher tax in later years.

That is why we create DTL on the difference in Depreciation amount (as per a/cs and tax) @ of tax rate applicable in the current year. 

The same wud be reversed in later years in which u'll claim depn on those assets in accounts but not get the benefit in tax.


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