26 October 2012
Deferred tax is the difference between accounting income and tax income. This can be explained with small Ex: Profit after book dep of Rs. 20 is Rs. 100 Income tax Dep is Rs. 50, then ur taxable income is Rs. 100 + Rs. 20 - Rs. 50 = Rs. 70. Hence, eventhough ur income is Rs. 100 as per books, u r paying tax on Rs. 70 only. On the difference of Rs. 30, u will be paying tax in future. Since this is a liability for the year, u will be creating a deferred tax liability on Rs. 30 for current year.
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