Deffered tax

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Querist : Anonymous

Querist : Anonymous (Querist)

10 April 2012 Sir

Please define me the deffered tax and how it treated in balance sheet.

thanks

mukesh kumar

CA Kishore Tallam

CA Kishore Tallam (Expert)
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10 April 2012 Deferred tax is the result of temporary differences between taxable incomes / allowable expenditures as per Income tax act and books of accounts.
Ex: Profit as per books is Rs. 100. But there is liability which will be allowed on payments basis of Rs. 20. Then income as per income tax is Rs. 120 and tax liability is 120*30% (assuming no surcharge & cess) = Rs. 36. But actual income is Rs. 100 on which i have to pay only Rs. 30 as tax. Hence, the difference of Rs. 6 is recognised as deferred tax asset in books.
If it is deferred tax liability, it will be shown after loans in old Sch VI and under long term liabilities in Rev Sch VI.
If it is a deferred tax asset, it will be shown after investments and before current assets in old Sch VI and under non current assets in Rev Sch VI.

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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10 April 2012 Well explianed by Mr. Kishore

Deferred tax is simply the difference of tax on accounting profit and tax as per income tax profit.

but for recognition purpose, only temporary differences are recognised in the books of accounts.

Temporary difference is the difference which can be settled/adjusted in future years and permanent diff does not have any effect on future income, hence not recognised

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