Tax

A. B.
Tax Deferred tax

Current tax Deferred tax Deferred tax arises due to timing difference between accounting income and

Tax on Tax which is Books of

current deferred OR accounts
year's Tax on timing
income difference

Difference

Timing difference

Has the
capability of
getting
reversed

Example - Unpaid duty

 C.

Deferred Tax Types

nce between accounting income and taxable income.
DTA DTL
Books Every organization maintains 1) This is like This is like
maintained for these two sets of records. We Prepaid tax outstanding
tax purpose pay as per tax books, but we expenses tax expenses
should pay tax as per accounts
books.

2) This decreases This increases

Future Tax liability Future Tax liability

Permanent difference

Does not have

the capability
of getting
reversed

Example - Donation to local puja committee

ure Tax liability
 Example of DTA Example of DTL

Accounts Tax
Yr 1 Yr 1
Profit 10000 10000 Profit
Less: Duty unpaid 1000 Not allowed Dep on Books
Taxable profit 9000 10000 Cost of books
Tax @ 10% 900 1000 Dep expense
Extra tax paid/ DTA 100 Taxable profit
Tax @ 10%
Yr 2 Less tax paid/ DTL
Profit 15000 15000
Duty previously unpaid Yr 2
Now paid Profit
Less: No treatment 1000 Dep expense
Taxable profit 15000 14000 Taxable profit
Tax @ 10% 1500 1400 Tax @ 10%
DTA reversed 100 DTL reversed

Yr 3
Profit
Dep expense
Taxable profit
Tax @ 10%
DTL reversed

Yr 4
Profit
Dep expense
Taxable profit
Tax @ 10%
DTL reversed
Accounts Tax

10000 10000
Each yr 25% for 4 yrs 100% in yr 1
1000 1000
250 1000
9750 9000
975 900
75

10000 10000
250 0
9750 10000
975 1000
25

10000 10000
250 0
9750 10000
975 1000
25

10000 10000
250 0
9750 10000
975 1000
25