11 May 2011
i want entry for provision for income tax & deffered tax till assessment year with some example. in a simple language. i am so much confused. pls tell me from starting means advance tax.
13 May 2011
I got one article, pls go through it, I think it will help you:-
In India , we all company pay income tax of previous year income . Means what we earn in last year we have to pay tax on next year that is called assessment year. But Under the law of Income tax , all company have to pay tax in advance . So without actual earning we starts to estimate earning .
For Example Suppose company can guess that it will earn Rs. 5 crore in this year . So on this advance guess company make his reserve or provision of income , it may be the 5% or 10% or 15% or 30% on his estimated income. This is called provision for income tax . Now company Make the voucher entry of this provision by providing amount from profit and loss account:- 1. Profit and loss account Debit To Provision for income tax account Credit After provision or estimated income tax , company submit his advance income tax return to income tax department ,then pass the following entry 2. Advance Income tax account debit To Bank Account credit After one year when income tax department calculate the real income tax by providing the real income position of company in previous year . You will remember following point
Adjustment of actual income tax with provision Actual income tax will adjust with provision of income tax by passing following adjustment entry 3. Provision for income tax account Debit To Income tax Account ( Actual after assessment ) credit
We must calculate the difference between actual paid tax and ( advance + tds ) If advance and tds is more than actual tax , then income tax department return your excess tax paid At this time two general entries will pass 1st transfer advance tax and tds to income tax account Income tax account debit Advance tax account Credit Tds account Credit 2nd journal entry will pass for return the amount Bank account debit Income tax account credit If advance and tds is less than actual tax , then income tax department demand more tax from you , and you will pay by following journal entry 1st transfer advance tax and tds to income tax account Income tax account debit Advance tax account Credit Tds account Credit 2nd journal entry will pass for return the amount
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