Dear Members,
will you please clarify me with regard to deferred tax?
What is deferred tax? How it creates? how accounting entries passed? And when we should recognise deferred tax assets/liability? Its urgent....
7 Replies
Vinit
(CA Final )
(188 Points)
Replied 13 May 2011
Deferred tax arises due to timing differences.If deferred tax liab. arises than debit it to P/L account normally. but if DTL arises than it can only be reconised (credit to p/L)if there is virtual/reasonable certainty as the case may be
Vinit
(CA Final )
(188 Points)
Replied 13 May 2011
If deferred tax Assets than certinty require not in case of DTL
CA Rakesh Garg
(Asst. MGR Taxation)
(510 Points)
Replied 13 May 2011
Hello Dear,
Deffered tax arises due to different treatment of accounts, as per company act and as per income tax act.
we have to maintain our books as per company act but we calculate income tax as per income tax act. so there arise a difference in taxes on income. there r mainly two types of differences, 1) temprary difference 2) permanent difference. deffered tax asset or liablities are created for taken the effect of temprary diff. No treatment r available 4 permanent diff.
if we have paid more tax(amount as per income tax act) than the tax ( amt as per co. act) , it will be deffered tax asset and if we have paid less tax than tax as per co act, then it will be deffered tax liab.
yet any confusion remain, do reply
SANJAY
(CHARTERED ACCOUNTANTS)
(943 Points)
Replied 14 May 2011
Dear Rakesh,
Thanks for ur reply... Will you please give me some example of deferred tax assets/liabilieties and how we calculate it...?? How entries are passes in books of accounts? Please reply soon..
CA Rakesh Garg
(Asst. MGR Taxation)
(510 Points)
Replied 14 May 2011
Hello,
There is a very customary example of DTL/DTA i.e. Depreciation
dep as per income tax= 100000
dep as per co act= 80000
so we will get the tax benefit for the diff. 20000. we have to pay less tax becz of excess depreciation.
so if tax rate is 30% then we get benefit of 6000/-. so it is our DTL which is recognised in the books as follow
P/L Dr 6000
To DTL 6000
and DTL would be shown under current Liablity. and this liab wiil be set off by the future DTA.
in future depreciation as per it act will be short than dep as per co act, then it become DTA and automatically setoff the existing DTL.
DTA treatment is vice versa of DTL
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