Deffered tax liability
This query is : Resolved
24 September 2013
what is deffered tax liability and what is a treatment
24 September 2013
Deffer tax means difference between the tax liability as per the books and as per the IT act. If tax as per the IT is more than the tax as per the books then it is called deffer tax liability. In such case the following entry has to pass
Income tax a/c dr
To Deffer tax a/c for the difference of tax payment value only
In case the situation is reverse i.e tax as per the books is higher than the tax as per IT then it is called as deffer tax asset then the following entry has to pass
Deffer tax a/c dr
To Income tax a/c.
For you better under standing the following example
ABC ltd is a company having its profits of Rs. 100000 for the year 2013-14 after debiting of depreciation of Rs.50000 as per the companies act.
But as per the IT act the depreciation allowable is Rs. 40000 only.
So as per the companies books tax liability is Rs.30,900 (30.9% on Rs.100000). But as per the IT act profit is Rs. 110000(100000+50000-40000), so tax liability is Rs. 33990 i.e Rs. 3090 is more tax as per the IT act so Rs.3090 is called as deffer tax. and vice-verse case called as deffer tax asset.
Deffer tax liability shall be give debit to the income tax account and credit to the deffer tax account and shall disclose at liabilities side of the balance sheet and deffer tax asset shall be give credit to income tax account and debit to deffer tax and shall be disclose at assets side of the balance sheet.
OM SAI SRI SAI JAI JAI SAI
Income tax a/c dr
To Deffer tax a/c for the difference of tax payment value only
In case the situation is reverse i.e tax as per the books is higher than the tax as per IT then it is called as deffer tax asset then the following entry has to pass
Deffer tax a/c dr
To Income tax a/c.
For you better under standing the following example
ABC ltd is a company having its profits of Rs. 100000 for the year 2013-14 after debiting of depreciation of Rs.50000 as per the companies act.
But as per the IT act the depreciation allowable is Rs. 40000 only.
So as per the companies books tax liability is Rs.30,900 (30.9% on Rs.100000). But as per the IT act profit is Rs. 110000(100000+50000-40000), so tax liability is Rs. 33990 i.e Rs. 3090 is more tax as per the IT act so Rs.3090 is called as deffer tax. and vice-verse case called as deffer tax asset.
Deffer tax liability shall be give debit to the income tax account and credit to the deffer tax account and shall disclose at liabilities side of the balance sheet and deffer tax asset shall be give credit to income tax account and debit to deffer tax and shall be disclose at assets side of the balance sheet.
OM SAI SRI SAI JAI JAI SAI
24 September 2013
There shall be so many reasons for difference in tax liability as per the books and as per the IT act. So to recognise such difference in books and separate identification deffer tax concept has been introduced.
OM SAI SRI SAI JAI JAI SAI
OM SAI SRI SAI JAI JAI SAI
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