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Deferred Tax

SANJAY (CHARTERED ACCOUNTANTS) (938 Points)

13 May 2011

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....

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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

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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

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SANJAY (CHARTERED ACCOUNTANTS) (938 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..