Hi,
Can anybody explain about the Deferred Tax Liability and Deferred tax Asset
and then how to calculate Deferred Tax Liability and Deferred tax Asset
Am awaiting for your valuable replies.................
vijaya kumar n (JOB) (488 Points)
15 September 2010Hi,
Can anybody explain about the Deferred Tax Liability and Deferred tax Asset
and then how to calculate Deferred Tax Liability and Deferred tax Asset
Am awaiting for your valuable replies.................
Bhakti
(CA)
(267 Points)
Replied 16 September 2010
Deferred tax liab(DTL) and DTA basically arises out of timing defferences.. like there are certain expenditures which are disallowed under income tax for a particular previous year but the same are deductible for arrivinf profit under books. Due to the same the book profit shall be lower but the income tax purpose profit shall be higher and hence u end up paying more tax ... but in future the expense disallowed earlier will be allowed so the condition shall be reversed..
Now in previous case in the year in which the expenses are disalllowed, it gives rise to deferref tax asset. (the logic behind this is that currently u pay higher tax so in future u will pay less tax and hence an asset...had it been the reverse situation like currently u pay less tax so in future u have to pay higher tax then DTL will arise.. e.g depr as per books are more than depr allowable as per Income tax)
U need to go through AS 22 also
CA Sachin D Jain
(FCA, CS, DISA (ICAI))
(1474 Points)
Replied 16 September 2010
The best way to prepare deferred tax computation is through 'COMPUTATION OF INCOME TAX'.
The items which are disallowed and added to net profit in computation will give rise to 'DEFERRED TAX ASSET'.
The items which are allowed and deducted from net profit in computation will give rise to 'DEFERRED TAX LIABILITY'.
Pl remember that the items giving rise to DEFERRED TAX ASSET / LIABILITY should be capable of being reversed in computation itself.
Master GSTR-9 and 9C with India's First Unique Live Course with Live practical training
CAclubindia
