TAX

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10 March 2009 PLS ANY ONE TELL ME WHAT IS Deffered Tax Liability AND DMA DETA

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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11 March 2009 Deferred tax is a accounting concept.
Deferred tax is the tax effect of timing differences. The differences between taxable income and accounting income can be classified into permanent differences and timing differences.
Timing differences are the differences between taxable income and accounting income for a
period that originate in one period and are capable of reversal in one or more subsequent periods.
Permanent differences are the differences between taxable income and accounting income for a
period that originate in one period and do not reverse subsequently

Permanent differences do not result in deferred tax assets or deferred tax liabilities.The tax effects of timing differences are included in the tax expense in the statement of profit and loss and as deferred tax
assets or as deferred tax liabilities, in the balance sheet. While recognizing the tax effect of timing
differences, consideration of prudence cannot be ignored.

In practical language
If tax as per income tax Act (which is actually paid) is more then tax as per accounting profit it constitutes deferred tax Assets, since we have paid more and the excess pais is assets and will be adjusted in future.

If tax as per income tax Act (which is actually paid) is less then tax as per accounting profit it constitutes deferred tax Liability , since we have paid less and the balance is liability and will be paid/adjusted in future.

This is only a stone of AS-22, for more detail either refer AS-22.

Regards……………..!