Deferred tax liability

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Vaibhav

Vaibhav (Querist)
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10 November 2013 can someone explain in simple terms what is deferred tax liability??

CA Pallav Singhania

CA Pallav Singhania (Expert)
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10 November 2013 Because there are differences between what a company can deduct for tax and accounting purposes, there will be a difference between a company's taxable income and income before tax. A deferred tax liability records the fact that the company will, in the future, pay more income tax because of a transaction that took place during the current period, such as an installment sale receivable.

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VAMSI ASSOCIATES/S.PHANI RAJ

VAMSI ASSOCIATES/S.PHANI RAJ (Expert)
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10 November 2013 deferred tax liability/asset can be created in books of accounts for a private/public limited companies under companies act only

it is a timing difference between depreciation provided as per income tax act and companies act (ex. difference between income tax act and companies act * companies income tax rate 30.9 %)
income tax act depreciation = 50000
companies act depreciation = 70000
deferred tax liability/asset is = 50000-70000* 30.9%

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