Income TAx provision accounting entries
This query is : Open
08 April 2009
Can anyone give me the deatil list of acounting entries to be passed for provision of Income tax.alongwith the advance tax paid and TDS receivable.
Whether the entries for provision of TAx are shown net of advance tax, tds receivable, provision written back etc or the advance tax,TDS is shown separate?
Whether the entries for provision of TAx are shown net of advance tax, tds receivable, provision written back etc or the advance tax,TDS is shown separate?
08 April 2009
For making provision
Profit and loss account Dr
To Provision for income tax
For tranferring advance tax and tds
Provision for income tax Dr
To Tds
To Advance tax
If TDS or advance tax shows debit balance then
Income tax refundable
To TDS
To Advance tax
If after passing all entries provision for income tax shows credit balance
Provision for income tax Dr
To self assessement tax payable
On payment
Self assessement tax a/c Dr
To bank
Profit and loss account Dr
To Provision for income tax
For tranferring advance tax and tds
Provision for income tax Dr
To Tds
To Advance tax
If TDS or advance tax shows debit balance then
Income tax refundable
To TDS
To Advance tax
If after passing all entries provision for income tax shows credit balance
Provision for income tax Dr
To self assessement tax payable
On payment
Self assessement tax a/c Dr
To bank
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22 times
10 April 2009
i support the expert...
but the adjusting entry of tds/ adv tax is to be passed on completion of assessment...
but the adjusting entry of tds/ adv tax is to be passed on completion of assessment...
Message likes :
6 times
23 April 2009
What is the accounting entry for income tax refund received by company.
Where to show the income tax refundable as indirect Income or to reduce the provision for the current year by that amount. Please confirm
Where to show the income tax refundable as indirect Income or to reduce the provision for the current year by that amount. Please confirm
26 May 2009
Accounting Treatment relating to Income Tax is as follows:
(1) At the time of paying advance tax:
Advance Income Tax Paid A/c Dr.
To Bank A/c
(2)At the time of making provision for Income tax Liability:
Profit & Loss A/c Dr.
To Provision for Income Tax A/c
From here onwards you will have to make proper assessment year wise reconciliation of both the accounts ie Advance Income Tax Paid A/c & Provision for Income Tax A/c. This is to be noted that every Assessment Year is separate in Income Tax.
(This is to be noted that in case of an assessee who is not in default Advance Tax deposited will always be greater or equal to Provision for Income Tax. Provision for Income Tax is nothing but current Tax as per the AS-22.)
(3) At the time of making self assessment payment, the entry will be same as in (1) but the narration will mention that it is a self assessment tax for the AY 200X-XX.
(4) when the Assessment gets completed there are few situations arises:
(a)when our income is assessed without making any disallowance & charging any interest :
Provision for Income Tax A/c Dr.
To Advance Income Tax Paid
(with the amount of Provision for Income Tax for the AY 200X-XX)
(b) when our income is assessed without making any disallowance but after charging interest eg u/s 234 : In this case the AO will issue the Demand letter u/s 156 for the payment of tax calculated under assessement , because as per rule tax paid is first adjusted towards the amount of interest due. He can also adjust this amount with any other refund which might due to you in respect of any other Assessment Year.
Along with the entry passed under situation (a) , the following entries will be passed
Interest Paid – Others A/c Dr.
To Bank A/c
In case it is adjusted with the refund of any other Assessment Year, then the entry will be:
Interest Paid – Others A/c Dr.
To Advance Income Tax Paid
In this case you must make it sure that the narration clearly mentions the assessment year of which refund is adjusted against the demand. Also you will have to make proper adjustment in your reconciliation of Advance Income Tax A/c & Provision for Income Tax A/c iro concerned AY.
(c) When Income is assessed with some disallowance & Interest payable:
This means that we have to pay tax demanded by AO.
(i) Income Tax Provision A/c Dr.
To Advance Income Tax Paid A/c
(with the amount provided for the respective Assessment Year)
(ii) Income Tax Provision for earlier years – Written Back A/c Dr.
Interest paid – Others A/c Dr.
To Bank A/c (if paid through Bank)
To Advance Income Tax Paid A/c (if adjusted by AO with refund of other AY)
(with the amount of Additional Income Tax Liability arises on assessment & Interest payable )
# This is to be noted that refund is not an Income from the Assessee point of view, However the interest received on refund is indirect income to be shown under other incomes.
In (ii) Case, if there is interest on refund which is also adjusted with the tax demand then the entries will be:
Income Tax Provision for earlier years – Written Back A/c Dr.
Interest paid – Others A/c Dr.
To Bank A/c (if paid through Bank)
To Advance Income Tax Paid A/c (if adjusted by AO with refund of other AY)
To Other Income (with amount of Interest recd. on refund which is adj. against tax demand)
(with the amount of Additional Income Tax Liability arises on assessment & Interest payable )
Note:- This is to be noted that in case tax on returned income is not equal to Current Tax Provision for the year, then you will have to pass the following entries to make it equal to tax on returned income (Reason for inequality may be the mistake or error that might have occurred at the time of making provision).
Case (a) – When tax on returned income is more:
It means you have made less provision for the Assessment Year, now you have to make the remaining provision. Now the entry will be:
Income Tax Provision for earlier years – Written Back A/c Dr.
To Provision for Income Tax A/c
Case (b) – When tax on returned income is less:
Just pass the reverse entry as passed in case (a)
(1) At the time of paying advance tax:
Advance Income Tax Paid A/c Dr.
To Bank A/c
(2)At the time of making provision for Income tax Liability:
Profit & Loss A/c Dr.
To Provision for Income Tax A/c
From here onwards you will have to make proper assessment year wise reconciliation of both the accounts ie Advance Income Tax Paid A/c & Provision for Income Tax A/c. This is to be noted that every Assessment Year is separate in Income Tax.
(This is to be noted that in case of an assessee who is not in default Advance Tax deposited will always be greater or equal to Provision for Income Tax. Provision for Income Tax is nothing but current Tax as per the AS-22.)
(3) At the time of making self assessment payment, the entry will be same as in (1) but the narration will mention that it is a self assessment tax for the AY 200X-XX.
(4) when the Assessment gets completed there are few situations arises:
(a)when our income is assessed without making any disallowance & charging any interest :
Provision for Income Tax A/c Dr.
To Advance Income Tax Paid
(with the amount of Provision for Income Tax for the AY 200X-XX)
(b) when our income is assessed without making any disallowance but after charging interest eg u/s 234 : In this case the AO will issue the Demand letter u/s 156 for the payment of tax calculated under assessement , because as per rule tax paid is first adjusted towards the amount of interest due. He can also adjust this amount with any other refund which might due to you in respect of any other Assessment Year.
Along with the entry passed under situation (a) , the following entries will be passed
Interest Paid – Others A/c Dr.
To Bank A/c
In case it is adjusted with the refund of any other Assessment Year, then the entry will be:
Interest Paid – Others A/c Dr.
To Advance Income Tax Paid
In this case you must make it sure that the narration clearly mentions the assessment year of which refund is adjusted against the demand. Also you will have to make proper adjustment in your reconciliation of Advance Income Tax A/c & Provision for Income Tax A/c iro concerned AY.
(c) When Income is assessed with some disallowance & Interest payable:
This means that we have to pay tax demanded by AO.
(i) Income Tax Provision A/c Dr.
To Advance Income Tax Paid A/c
(with the amount provided for the respective Assessment Year)
(ii) Income Tax Provision for earlier years – Written Back A/c Dr.
Interest paid – Others A/c Dr.
To Bank A/c (if paid through Bank)
To Advance Income Tax Paid A/c (if adjusted by AO with refund of other AY)
(with the amount of Additional Income Tax Liability arises on assessment & Interest payable )
# This is to be noted that refund is not an Income from the Assessee point of view, However the interest received on refund is indirect income to be shown under other incomes.
In (ii) Case, if there is interest on refund which is also adjusted with the tax demand then the entries will be:
Income Tax Provision for earlier years – Written Back A/c Dr.
Interest paid – Others A/c Dr.
To Bank A/c (if paid through Bank)
To Advance Income Tax Paid A/c (if adjusted by AO with refund of other AY)
To Other Income (with amount of Interest recd. on refund which is adj. against tax demand)
(with the amount of Additional Income Tax Liability arises on assessment & Interest payable )
Note:- This is to be noted that in case tax on returned income is not equal to Current Tax Provision for the year, then you will have to pass the following entries to make it equal to tax on returned income (Reason for inequality may be the mistake or error that might have occurred at the time of making provision).
Case (a) – When tax on returned income is more:
It means you have made less provision for the Assessment Year, now you have to make the remaining provision. Now the entry will be:
Income Tax Provision for earlier years – Written Back A/c Dr.
To Provision for Income Tax A/c
Case (b) – When tax on returned income is less:
Just pass the reverse entry as passed in case (a)
Message likes :
21 times
27 May 2009
Mr Rajdeep
Thank very much for your detailed reply.
What will be the entries if there is following case:-
1.Income as per Return - 100
2.Assessed Income- 120
3.Provison for tax- 30
4.Advance tax paid-40
4.Assesed tax after some disallowance-35
5.Assestment order- Refund of 5(Including interest 0.5)
What will be the entry for refund received from income tax?
Please help
Thank very much for your detailed reply.
What will be the entries if there is following case:-
1.Income as per Return - 100
2.Assessed Income- 120
3.Provison for tax- 30
4.Advance tax paid-40
4.Assesed tax after some disallowance-35
5.Assestment order- Refund of 5(Including interest 0.5)
What will be the entry for refund received from income tax?
Please help
29 May 2009
The following entry will be passed at the time of completion of Assessment:
Provision for Tax A/c Dr. 30
Taxation of Earlier Yr Dr. 5
Bank A/c Dr 5.5
To Advance Tax Paid A/c 40
To Interest Recd.-Others 0.5
(Being Entry passed on the completion of Assessment for the AY 20XX-XX)
Provision for Tax A/c Dr. 30
Taxation of Earlier Yr Dr. 5
Bank A/c Dr 5.5
To Advance Tax Paid A/c 40
To Interest Recd.-Others 0.5
(Being Entry passed on the completion of Assessment for the AY 20XX-XX)
Message likes :
1 times
30 May 2009
Thanks Mr Rajdeep
Lastly Where will be the head - taxation of earlier year a/c (Dr balanace) will be shown in Balancesheet.
Lastly Where will be the head - taxation of earlier year a/c (Dr balanace) will be shown in Balancesheet.
30 May 2009
It is a P&L item & not a balance sheet item. Bal. of this account will be expensed out.
Message likes :
5 times
05 May 2015
Hello Rajdeep,
I have a doubt, if assessment completed but assessee is in Appeal then whether we should set off the advance tax with provision or should wait for final decision of appeal?
Thanks in advance.
Abhishek
I have a doubt, if assessment completed but assessee is in Appeal then whether we should set off the advance tax with provision or should wait for final decision of appeal?
Thanks in advance.
Abhishek
Message likes :
2 times
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