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Deffered Tax

Ajnas (Student) (844 Points)

24 July 2020

depreciation is calculated as per income tax in accounts and in 32 depreciation, but in the current year there is cash purchase of asset Rs.15000 in the current year so such cost not considered as actual cost in the income tax, in such case there is difference between book value and income tax wdv value, there is any need to create deffered tax in this situation?

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3 Replies

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 24 July 2020

No, there is no need to create deffered tax as this is a Permanent Difference – Differences between book income and tax income which are not capable of reversing in subsequent period

Ajnas (Student) (844 Points)
Replied 24 July 2020

Are you sure?

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 24 July 2020

Yes diet
we pay cash above Rs.10,000/- this expense will not be allowed for tax purpose any time. So this is permanent difference.

We should keep in mind that Deferred Tax Liability or Deferred Tax Assets are created only for temporary timing difference. For permanent difference it is not created as they are not going to be reversed in future.