Defered tax
This query is : Resolved
24 August 2011
Dear Experts,
I am confused regarding the treatment of Defrd. tax as per AS 22.
Please suggest as per the following informations:
If Op. Bal. of DTL Rs. 183580/- and Depreciation as per books Rs. 20,38,949/- & as per I.T. Act. Rs. 19,26,336/- then what amt. will be the closing balance under DTL or DTA and what amt will be transferred to PL (Dr. or Cr.)?
Thanks in advance.
Dulal Chatterjee
I am confused regarding the treatment of Defrd. tax as per AS 22.
Please suggest as per the following informations:
If Op. Bal. of DTL Rs. 183580/- and Depreciation as per books Rs. 20,38,949/- & as per I.T. Act. Rs. 19,26,336/- then what amt. will be the closing balance under DTL or DTA and what amt will be transferred to PL (Dr. or Cr.)?
Thanks in advance.
Dulal Chatterjee
25 August 2011
Timing difference is Rs. 1,12,613/-
DTA is @ 30.90% Rs.34,797/-
Pass entry as follows:-
DTA Dr Rs.34797/- (consider in B/S)
To Deferred tax Rs. 34,797/- (credit in p & l a/c)
Square up with op balance & net amount Rs. 1,48,783/- may be shown in balance sheet as DTL.
DTA is @ 30.90% Rs.34,797/-
Pass entry as follows:-
DTA Dr Rs.34797/- (consider in B/S)
To Deferred tax Rs. 34,797/- (credit in p & l a/c)
Square up with op balance & net amount Rs. 1,48,783/- may be shown in balance sheet as DTL.
Message likes :
1 times
25 August 2011
In case of depreciation due to depreciation rate & calculation difference for depreciation calculation as per Income Tax & as per Companies Act asme issue will arise.
Such timing difference will get settled in later years for which we create DTA/DTL.
DTA arises when Profit as per books of A/c is less than profit under head PGBP as per Income Tax due to such transactions.
While
DTL arises when Profit as per books of A/c is more than profit under head PGBP as per Income Tax due to such transactions.
In this case depreciation as per IT act is less than depreciation as per Companies Act, hence the profit as per IT act shall be more under PGBP head as compared to Profit as per books by Rs. 1,12,613/- [2038949-1926336]
Now always remember one thing that rate of depreciation as per IT act are higher than rate of depreciation as per companies Act hence, you will never have DTA on depreciation.
So in case even though the profit as per companies act is less than PGBP as per IT act we shall not provide for DTA because depreciation as per IT act is less than dep as per companies act, it simply means it is reversal of DTL earlier provided for dep.
Hence applying the Deferred Tax rate of AY 2011-12, DTL shall be reversed by Rs. 37,407/- on this difference amount i.e.
[112613 x 33.2175%]
DTL A/c Dr.----------- 37407
To P&L A/c Cr.------------ 37407
The net DTL to be shown in Balance sheet shall be Rs. 1,46,173/- i.e.
[183580-37407]
Such timing difference will get settled in later years for which we create DTA/DTL.
DTA arises when Profit as per books of A/c is less than profit under head PGBP as per Income Tax due to such transactions.
While
DTL arises when Profit as per books of A/c is more than profit under head PGBP as per Income Tax due to such transactions.
In this case depreciation as per IT act is less than depreciation as per Companies Act, hence the profit as per IT act shall be more under PGBP head as compared to Profit as per books by Rs. 1,12,613/- [2038949-1926336]
Now always remember one thing that rate of depreciation as per IT act are higher than rate of depreciation as per companies Act hence, you will never have DTA on depreciation.
So in case even though the profit as per companies act is less than PGBP as per IT act we shall not provide for DTA because depreciation as per IT act is less than dep as per companies act, it simply means it is reversal of DTL earlier provided for dep.
Hence applying the Deferred Tax rate of AY 2011-12, DTL shall be reversed by Rs. 37,407/- on this difference amount i.e.
[112613 x 33.2175%]
DTL A/c Dr.----------- 37407
To P&L A/c Cr.------------ 37407
The net DTL to be shown in Balance sheet shall be Rs. 1,46,173/- i.e.
[183580-37407]
25 August 2011
The rate of tax for calculating deferred rate of tax liability for the year ending 31st March, 2011 for domestic co. is 33.2175%
i.e.
30% + [(2% + 1%) of 30] = 30.9%
Now,
Add Surcharge@7.5%
i.e. 30.9% + 7.5% of 30.9 = 33.2175%
i.e.
30% + [(2% + 1%) of 30] = 30.9%
Now,
Add Surcharge@7.5%
i.e. 30.9% + 7.5% of 30.9 = 33.2175%
25 August 2011
Surcharge @ 7.5% is applicable if and only if the taxable income of a domestic company exceeds rupees one crore in the assessment year 2011-12.
Message likes :
1 times
25 August 2011
Agreed with warrior sir but since the depreciation amount is about 20 lakhs I have assumed that profit of company is more than Rs. 1 crore & hence deferred tax applicable to the referred company shall be 33.2175%.
Otherwise it shall be 30.9% only without surcharge..
Otherwise it shall be 30.9% only without surcharge..
Message likes :
1 times
26 August 2011
I agree with the experts
29 August 2011
Deferred Tax is calculated using last known tax rates and in my opinion surcharge is to be taken at 5% whuch is applicable for the AY 2012-13 because the future tax is going to reverse at this rate.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Is this income indian or foreign income?
- ITC temporary reversal and reclaim
- Inventory of finished goods
- Applicable TDS rate for sale of property in Nov 2024
- Confusion around Form 26QB fields
- Tds on building rent monthly
- Quiery in relation to GST liability in case of an advocate who has obtained GST registration.
- RCM INVOICING FROM NOV-2024
- REGARDING 25 AS DATE OF PAYMENT AND DATE OF BOOKING
- Can we claim ITC of Feb-2024 in the month of November-2024 which was not claimed by oversight
- Clarification on Documentation of Paid-Up Capital Contribution by Directors
- TDS under section and rate of TDS
- GST input on scooter purchased
- TDS under section 194Q and TCS under section 206C
- GST input on car insurance and repairs
- GST input on Diwali gift to employee
- GST input on Mobile Handset
- Material and freight in same invoice
- TDS under section 194J inclusive of reimbursement of expenses
- TDS on Material and Labour in same invoice
Trending Online Classes
CAclubindia
