16 May 2009
give me a brief idea about calculation of deffered tax. wchich area has to be taken care of.which incometax section covered for deffered tax.
16 May 2009
Differed tax araises due to timing differences of recognition of various tax deductible transactions in both Accounting and tax calculations.
Eg: Depreciation on Fixed Assets.
for example As per companies act one asset is eligible for 100% depreciation in the first year itself, but the case may not be the same under sec 32 of the Income tax act it may gives some other rate of depreciation on that asset.lets assume it allows only 50% in the first year and remaining in the subsequent year.
as per accounting books shows a lower profit and tax liabiltity due to higher depreciation claimed in this year ony compared to IT profit.
It is a clear case of Differed tax asset..... we will pay more in this year we will carry it as a differed tax asset in our balance sheet which is going to be offset in the coming year...... in the short range period difference will apprear but in long range timing difference is going to be setoff.....
One more thing Differed tax will not araise due to permanent differences between these two profits.
If you reverse the above example it will give the situation of differed tax Liability.
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