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What is Deffered Tax?
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Answer Posted / chalapathi rao govada
Differed Tax is difference in the tax liability as per
Accounting profit and Tax liability as per Income tax Act
(sec 115JB).
Differed tax araises due to timing differences of
recognition of various tax deductible transactions in both
Accounting and tax calculations.
Eg: Depreciation on Fixed Assets.
for example As per companies act one asset is eligible for
100% depreciation in the first year itself, but the case
may not be the same under sec 32 of the Income tax act it
may gives some other rate of depreciation on that
asset.lets assume it allows only 50% in the first year and
remaining in the subsequent year.
as per accounting books shows a lower profit and tax
liabiltity due to higher depreciation claimed in this year
ony compared to IT profit.
It is a clear case of Differed tax asset..... we will pay
more in this year we will carry it as a differed tax asset
in our balance sheet which is going to be offset in the
coming year...... in the short range period difference will
apprear but in long range timing difference is going to be
setoff.....
One more thing Differed tax will not araise due to
permanent differences between these two profits.
If you reverse the above example it will give the situation
of differed tax Liability.
| Is This Answer Correct ? | 29 Yes | 6 No |
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