ALL ABOUT DEFERRED TAX LIABILITY
- Blog|Income Tax|
- 2 Min Read
- By Taxmann
- |
- Last Updated on 14 July, 2022
WHAT IS DEFERRED TAX LIABILITY?
Illustration: (Deferred Tax Liability calculation):
Mr. X spent Rs. 3 Crores on advertisement of a newly launched product in the year 2017-18. His team forecasts that this advertisement will earn them benefit for 3 years. This amount of Rs. 3 crores shall be treated as:
|
Year I |
Year II |
Year III |
Expenses as per Income Tax Laws |
Rs. 3 Crores |
0 |
0 |
Expenses as per Financial Books |
Rs. 1 Crore |
Rs. 1 Crore |
Rs. 1 Crore |
Also Read: Deferred Tax Asset
Deferred Tax Liability in case of loss:
When the books of accounts reflect profit for the period under consideration but there is loss as per the provisions of tax laws due to timing difference, then in that case also, the deferred tax liability is required to be recognized and carried forward to subsequent years.
No consideration to time value of money:
It is important to note that as per deferred tax accounting standard, amount of deferred tax shall not be discounted to its present value. Hence, while doing deferred tax calculation, the time value of money is ignored.
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