Under or excess tax provision in accounts vis a vis tax payable per IT ACT

When there is a short or excess provision of income tax as accounted for in audited accounts per Co Act vis a vis Income Tax Act, how do we account for the same after account closing by A COMPANY?

Please guide journal entry and modality / mechanism

Replies (6)
Quick Summary
If income tax provision is excess, it is written back to P&L as �Excess provision written back.� If there is short provision, additional tax liability is booked and adjusted with advance tax and TDS. Final payment is made for remaining balance after adjustments.

Is there any Advance Income Tax paid and TDS deducted by the party , during the F.Y ?.
Just write off or reversed it. For more descripttive explanation, mention the nature of expense

Yes.Mr.Nilugal.

Kindly advise journal [ short or excess provision] entries at the time of making tax payment as per tax audit / assessment per IT Act, while tax provision was previously made as per Co Act.

Regards

If provision is greater than Tax calculated in return, we have to reverse the additional provision made : Accounting entry will be as under: Provision for Income Tax A/c Dr To Excess Income tax Provision for Earlier years –written back

Many thanks.

Please state journal for short provision

Rgds

On 31/3/2023 provision for Income tax, let's say 50000/- ( example)

Income tax A/c Dr 50,000/-
Provision for Income tax A/c Cr 50,000/-
( provision entry)

Next year after assessment Income Tax payable is 80000/- so short provision and balance income Tax payable is 30000/- , after adjustment of Advance Tax and TDS carried forward from last year and same has been already paid ( Advance Tax 15000/- , TDS 5000/- )

Provision for Income Tax A/c Dr 50000
Income Tax payable ( last year) A/c 30000/-
To Advance Tax. A/c Cr 15000/-
To TDS A/c Cr 5000/-
To Bank A/c Cr. 60000/-
( Last year income tax paid after adjustment of Advance Tax and TDS)

Here TDS is deducted by party during the F.Y

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