what is ment by deffered tax asset and deffered tax asset?
dhanalakshmi (ipcc) (87 Points)
11 February 2012what is ment by deffered tax asset and deffered tax asset?
CA Miss Naamah
(N H R & Associates)
(377 Points)
Replied 11 February 2012
Deffered tax is accounting for the tax which would arise in near future. Many times, due to depreciation or disallowances, our profit as per profit/ loss account and taxable profit as per income tax act, do not match. So, defered tax provision is created to balance out the same in the books of accounts.
Eg : Profit as per Profit / loss account - 1,00,000 and taxable profit - 70,000 Now, there is a difference of 30,000. On this 30,000 - defered tax provision is made.
The difference in profits should be in the nature of timing difference i.e. temporary and not permanent.
Eg : Timing differences - depreciation as per companies act and as per income tax act, etc.
Permanent differences - Disallowances of donation, etc...
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