deferred tax

This query is : Resolved

monia (Querist)
Follow

09 June 2009 Hi All

Can you help me in the following question with examples

1. what is deferred tax? with example
2.what is deferred tax asset?with example

3.what is deferred tax liability?with example

Thanks
Monia

ponibass

ponibass (Expert)
Follow

10 June 2009 Actually its not a tax question. Its accounts (AS). Concept is very simple. Take an example of Bonus. If u r making any provision, U can allow as expenditure in accounts. But Income-tax act wont allow. So it results as Deferred Tax Asset. How? . It will save your future tax. According to Sec.43B, you can allow on the basis of payment basis. So if u pay next year, u can allow. So it will reduce your tax burden. " Pay tax now; Save tax later" - DTA. Eventhough u made a provision for bonus, In IT, we have to disallow and u have to pay tax. Thats all. It follows matching concept in accounts.