Defered Tax

[Guest]

Dear Sir,

Please tell us , what is defered tax ..?

how top calcualate it on which figer ?

please explane by a example....

regards

keshav.

[CA Rachit Agarwal]

Deferred Tax is calculated on the timing differences that are capable of setting off due to differences in Companies act and Income Tax Act,

Eg. Depreciation under Companies Act is 10% and Income Tax Act is 13%. Hence we got income tax benefit on 3% extra. Hence our liability during the current year will be less and in future liability will be more and deferred tax liability will be Rs. (Depreciation as per IT-Depreciation as per Companies Act) multiplied by the tax rate.

[Prasanna K]

Deferred Tax is created on the Difference Between Accounting Income (Net Profit before Tax) and Taxable income (as per Income Tax Act, 1961). As per the standard deferred tax has to be recognised on all Timing difference i.e. a difference occured in a year and capcable of reversal in another year. for eg. Disallowance of expense for Non deduction of TDS which is allowable in future years. Prelininary expense u/s.35D, Depreciation difference between IT Act and Companies act

In case of permanent difference i.e. it does not have a capability for reversal in another year. For Interest and Penalty etc. ROC Fees for increase in Capital (disaalowd under IT), Companies act depreciation on Revalued portion etc are the cases which require adjustment in taxable profit but not allowed subsequesntly.

AI Summary

Understanding Deferred Tax: Timing Differences in Tax Liabilities Explained with Examples from Income Tax and Accounting Standards. A query was raised about deferred tax, seeking an explanation and calculation method. A respondent explained that deferred tax arises from timing differences between the Companies Act and the Income Tax Act, such as differing depreciation rates, affecting current and future tax liabilities. Another respondent noted that deferred tax is based on differences between accounting income and taxable income, recognizing timing differences that can reverse in future years. They highlighted examples like TDS disallowance and preliminary expenses, while permanent differences, such as penalties and certain fees, do not reverse and require adjustments in taxable profit.