Dtl and dta

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

26 May 2014 i have an opening DTL of rs 635. in current year my depreciation as per companies act is 8494 and as per IT act is 7801. plz suggest me how to create DTA or DTL in this case. And plz specify the whole treatment of DTA and DTL in the above situation. what are the all journal entries i have to pass. please help me.

C.A. Mayur J. Raiyani

C.A. Mayur J. Raiyani (Expert)
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26 May 2014 the diff of dep is Rs. 693 and it is less compared to books hence you need to create DTA by Rs. 30.9% of 693
Journal entry :
DTA a/c Dr
To P & L Account

Querist : Anonymous

Querist : Anonymous (Querist)

27 May 2014 whether the DTL would not get reduced by the amount of DTA. I mean can we just pass an entry : DTL a/c Dr (693*30.9%)
To P&l a/c
so that the DTL will automatically gets reduced by the DTA amount.

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C.A. Mayur J. Raiyani

C.A. Mayur J. Raiyani (Expert)
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31 May 2014 no you cannot do this.
this is so because DTA/DTL is arised only due to timing difference. Timing difference is one which is capable of being reversal in subsequent period.
Consider an example.
Plant and Machinery Rs. 50,000
Method of depreciation in book WDV 20%
Allowed method of Depn as per IT SLM 60%
Calculation of Depn :
Year Depn(book) Depn (IT)
1 10000 30000
2 10000 12000
3 10000 4800
and so on..
Now, in first year you will pay less income tax as you get benefited by excess depn available as per income tax act, hence you need to create DTL. In the third year onwards, depn is less in IT and more in book, hence you will pay more income tax so you need to reverse DTL. Ultimately, this DTL gets nullified if suppose only one assets is there. That's why concept of "Capable of being reversal" is. However, practically you need to have detailed historical calculation in order to calculate DTA or DTL. One more thing, till date, for the purpose of reporting DTA and DTL netted off but with Companies Act, 2013 this shall be shown separately.