Deferred Tax

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Gayathri

Gayathri (Querist)

16 December 2009 What is Deferred Tax?

CS Snehal

CS Snehal (Expert)

16 December 2009 Deferred tax is an accounting concept, meaning a future tax liability or asset, resulting from temporary differences between book (accounting) value of assets and liabilities and their tax value, or timing differences between the recognition of gains and losses in financial statements and their recognition in a tax computation.

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)

16 December 2009 You see that there is a difference in profit shown by P & L a/c and the profit determined by the Computation of Income prepared for Income-Tax purpose.

So if the present rate of Income tax is applied to book profits then definitely it will be more than what has been determined in the income tax.

Since you have paid less as per book results; it means this liability is to be raised in future.

This is Deferrement of Tax (Liability)

Opposite is Deferred Tax Asset

CA SIDHARTH HIRALAL PATNI

CA SIDHARTH HIRALAL PATNI (Expert)

16 December 2009 Deferred tax is the effect due to timing difference.
It is calculated by comparing profit calcultated as per tax law and as per company law.

For more details u can refer to AS 22.

Gayathri

Gayathri (Querist)

18 December 2009 Can u explain deferred tax with an example? & when it will become nil?

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