Wealth tax provision entry

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

10 April 2014 CAn Any body tell me the reversal entry of wealth tax provision.
Lets Say on 31st March 2012 we have passed the Entry of Wealth Tax Provision:
Wealth Tax Dr. 786000
To Provision for Wealth Tax 786000
now on 26th Sep 2012 Wealth Tax paid is 8,00,000
Now what will be the entry for revising the provision of Wealth Tax??

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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10 April 2014 2 ways you can pass the entry

Dr: Provision for wealth tax Rs.786000
Dr: Wealth tax Rs.14000
Cr: Bank a/c Rs.800000

or

reverse complete provision and pass the payment entry fully

Dr: Provision for Wealth tax Rs.786000
Cr: Wealth tax Rs.786000

payment

Dr: Wealth tax Rs.800000
Cr: Bank Rs. 800000

Binod Padhi

Binod Padhi (Expert)
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10 April 2014 The year of 31st march 2012 already ended. So the balance sheet is already drawn as at date of 31st march due to that You cannot revise the provision amount.So the first entry passed by Ramesh is correct and Rs 14k can be treated as prior preiod expenses in this year,to be charged in P&L of 2013.

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Querist : Anonymous

Querist : Anonymous (Querist)

10 April 2014 Thanks Ramesh Krishnan..just have one more query lets say in the above example if wealth tax paid is say Rs. 700000 then what will be the reversal entry.
In our company we have not reversed the wealth Tax provision Since last 10 Years. we i need to reverse the entire provision entirely year by year.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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10 April 2014 Incase your wealth tax liability is Rs.700000 then the entries are

Dr:Provision for Wealth tax Rs.786000
Cr: Wealth tax Rs.86000
Cr: Bank Rs. 700000

Or
Dr: Provision for wealth tax Rs. 786000
Cr: Wealth tax Rs.786000

Payment

Dr: Wealth tax Rs.700000
Cr: Bank Rs.700000

Provision can be kept till the assessment completion once assessment order received you can reverse the provisions. so till which year your assessment complete till that year you can reverse the provision and adjust the liability