AS 22 Accounting for on Income

Cubent Deferred
Tax Tax

TaxRate 30

Example
Year 2025 26
100 crores
exp disallow
Books of Alc's µ
Accrual Tax Books
Revenue 1000 crores Revenue 1000 crores
AM
700 crores's Expenses 600crores
Expense
PBT 300 crores PBT 400 crores
a Tax 30 No 90 mores
c Tax 30 120 crores
Tax to be booked in Alc's
Tax to be
paid

I Current Tax
an
exp pic Alc Dr 900
Prepaid Exp Asset Do 30M Def TaxAsset
TO CIB All 120 or
 42 2026 27
or
P J exp 100
allow
Ale's Tax Books
Revenue 1000 crores Revenue 1000 crores
700 crores 800crores
Exp Exp
PBT 300 crores PBT 200 crores
Tax 30 90croves
Tax 30 60 crores

Tax to be paid
Tax Exp PII All Do 90chores Current Tax
IF
TO CB All 60 crores
to Prepaid Exp Reverse 30 crores DTA Reverse

Summary
Carr Tax Tax paid to taxation
authority
Def Tax Diff Btw Tax Accrued
a Tax
paid

25 26
Proper J E ar

1 Current Tax Deferred Tax

Carr Tax ExpP 20 Deferred Tax Asset All Do 30

TO CIB 120 TO PIL 30
 SM III PIL Draft
Tax
Fxp
Current tax 120
Def tax 30 90

1 Definitions

a Deferred Tax
It isthe tax effect of timing difference between Alcing profit a
taxable profit

Deferredtaxasset ID.AT
tax in corr Year but will
pay less tax
DTA means paid more in Future

Deferred Tax liab DTL

DTC means
paid less tax
in our Year but will
pay more tax in future

Current tax
It is the amount of tax determined to payable in
respect of taxabl
in come

Tax Expense
Current Tax Exp CH Def Tax liab C Def TaxAsset
 Timing Difference
These are diff between Accounting income a taxable income that
originate in one period are
capable of reversal in one or more
subsequent period
preliminary exp Exp allowed cash Basis
Cog Depin on

timing diff
Create DT on all

Permanent Difference
These are differences between accounting income te taxable income that
2 Do Not Reverse subsequently
originate in oneperiod
eg Fines Penalties Donation to Put Trust etc These are permanently
disallowed in tax

NO DT is created on
permanent difference

Examples to calculate Deferred Tax

Depreciation Fxp as per Alcingrecords 2 00,000 tax Rate 30

Tax records 5 00.000

Calculate Deferred Tax

Parties Alc's Tax Diff Def Tax 30

2.00.000 5,00000 3.00.000 90,000 D.TL
Depr exp
Exp PIC
profitt TO DM
Aaj Tax to

Future main zyada DM

 Preliminary Exp Amount to 30,000
Full Exp Allowed in Alc's Tax Rate 30
But in tax it is un amortized
Notallowed in current but will be allowed in future
year

Calculate Deferred Tax

Particulay Alc's Tax Diff Def tax 30

Preliminary Fxp 30000 MIL 30000 9000 DTA

Exp to DTA
Profit TO PIL

AajTax
Future mein taxKum DTA

Int Fxp Accrued in cur Year 3.00.000 allowed as exp in

Alc's
Since it was not disallowed in war Year in tax
paid it was
Tax Rate 25
Calculate Def Tax

Particulars Alc's Tax Diff DT 25

Int Exp 3L NU 32 75,000 DTA
Exp
Profit
AajTax
Futuremein Kum DTA
 BBV Itd purchased an PPF costing 101 on 01.04.24 In tax 100

depreciation is allowed in the yearof

purchase
In Alc's SLM method is followed and life is 4
years

Calculate D T for all 4

years Tax Rate 30

Soin
Year 24 25
Alc's Tax Diff D T 30

Depm Exp 2.51 101 7.52 2.252 DI

1044ps Exp Plc 22500

profit 1 TO DTL 22500

Aaj Tax
Future tax zyada DTL

year 2 25 26
Alc's Tax Diff DT 30
Depin Exp 2.51 NIL 2.52 75K
DM Reverse
Exp to
Profit TOPIC

AcgTax
Future mein Kum C.PT
DT Reversal
 Year 26 27

Alc's Tax Diff D 30

Depin Exp 2.51 MIL 2.52 75000

Exp 1 DTCReversal 75K

Profit n TO PIL 75K
Tax
Future mein Kum CDTAN
DTL Reversal

Year 4 27 28

Alc's Tax Diff D 30

Depin Exp 2.51 MIL 2.52 75000

Exp 1 DTC Reversal 75K

Profit n TO PIL 75K
Tax
Future mein Kum COTAN
DTL Reversal
check
ur Dte create 225000
412 DTL Rev 7514
413 7519
non
 Eg 5 Preliminary Exp 75000
100 claimed in Ali's in curr.us 24 25
But unaurortised in Tax In tax Books it was claimed in 25 2
Calculate Def Tax Tax Rate 30
uri 24 25
Particulars Alc's Tax Diff DT 30
Prel Exp 75000 MIL 75000 22500 DT A
Exp
Profit n DTA
to PIL
Aaj Tax
Future mein Kun i DTA

42 All's Tax Diff D T 30

MU 75000 75000 22500

Exp PIL
Profit TO
DTAReversal
Aaj Tax
Future main zyada DM
DTA Reverse

Eg Fines 4 Penalties is
50,000
paid
Exp was Booked in Alc's
In Tax Fines penalties is permanently disallowed
Calculate Def Tax Tax Rate 307
 Alc's Tax Diff D T 30
finest MM
Penalties
50000 50000
Permianent
1500
Diff It will never
NO DT reverse

Why

Illust
Particulars Ale's Tax Diff D T 50
0
2 00,000 5 00,000 300,000 150000 DTL
Depm
Timing
Exp
Profit to
Aaj Tax
Future
meinzyada

30000 NIL 30.000 15000

Preliminary DTA
Exp Exp Timing
Profit

AajTax
Future mein Kum
1 35,000 Ditt

ilus 7 HI
Illusy CDR

Yearl Xo X1

Particulars Ale's Tax Diff DT 357

Revenue 11.00.000 7 00,000 4 00,000 140000 DTL
Income 1 Timing PIL
Profit TODTL

Aajtax
Future mein zyada DR

Year 2 X1 X2 p DM
Revers
Revenue 16.00.000 18 00,000 200000 70000
Income Timing DM Reversal
profit TOPIC

AajTax
Future meinKum DTA
DTeversal

Year x2 3
Revenue 21.00.000 23.00.000 200000 70000 DTL
Revers
Income Ctiming
Profit a
Acytax
Future mein KunCDTS
DM Reversal
 Illus 8
411
particular Alc's Tax Diff DT 30
GST Exp 5 00,000 MU 500000 150000 DTA create
Ep to Timing DTA
TO PIL
Profit
Aajtax
Future mein Kum DTA

Ques 2 CDR

for the
yearended 31ˢᵗ
Statement of Profit loss march 19 Extract
to's

Profit Before Depreciation Taxes 640000

less Depreciation as Alc's 310000
per
120000
280000 300007 4yrs

Profit Before Tax 330000

Less Tax Exp
Current Tax WM 132000
Deferred Tax WNL NIC 132000

Profit After Tax 198000

 cum corn of Carr Tax it is tax
paid on taxable profit
Toks Profit Before
Dep a Tax 640000
less Depon as per tax
190000 120000 l
PBT Taxanprofit
40
132000

Curent Tax

whez Def Tax

Particulars Ali's Tax Diff D 40

0 Depm 280000 190000 90000 36000 DTA

Ep to
Profita

AajTax
Future mein Kum DTA

Depm 30000 120000 90000 36000 DT

11 exp
Profit

Aaj tax
Future mein spada DTC
Net Def Tax

Disclosure requirements
Read from Ques Bank
Ques
i Particulars

Exp PY 1920 Ale's Tax Diff Dt 30

20lakles MM 201 6L DTA

Expt Extra
profit Part
Aaj Tax
Future mein Kun DTA

Exp 20 21 Alc's T Diff D T 30

20lakus
NT 20 6L DTA
Timing Reversal
Exp
Profit t

AajTax
Future meinzyadaf.DK

Ali's tax Liff DI

Interest 201 201 NoDiff No DT
accrued a
paidBefore
duedate

ii Donation 101 nice 101 No DT

Permanent

Diff
Of UDR
Particulars Alc's Tax Diff DT 40
i 70L 421 282 11.2 lakhs DTA Create
Depm
Exp to
Profit
a
Aaj Tax
Future mein Kum DTA

i Exp PY 1920 Ale's Tax Diff Dt 40

Ex Extra
Profit Part
AagTax
FuturemeinKum DTA

xp 20 21 Alc's T Diff DT 40
NT 14ham 14 5 61 DTA
Timing Reversal
Exp
Profit 1

AugTax
Future meinzyadaf.DK

ii share issue Alc's Tax Diff D 40

701 71 631 2521 DTA
4
9 19 20 410 timing

Entiti
Future main Kum DTA
 Dit 40

by 20 21 MU H 71 2.81 DTA Reversal

Exp Timing
Profit
Tax
Future main
syada NA
DTA Reversal

in Repairs Ale's Tax Diff DT 40

istyr 20 21 701 1401 70L 281 s DTL create
140
24s Exp Timing
Profit
AajTax to
Futuremein DT
zyada

07 CDR
HOTD P 2 practice
2 DTA on
carry forward losses unabsorbed deprn in Tax

in less tax in future

Carry forward losses result create DTA
Unabsorbed depm will also result in less tax in future as we will take
the depm
exp benefit in future in tax create DTA

41 24 25 Co has a tax loss of St Tax Rate 30

eg
Create
DLA SIX 30 1.52

48 25 26

Co has a profit of 21
e will adjust
Tax 30 Go past year lose
DTA Reverse 60K

DTA Bal 1.52 1 7 60K 90k

a
profit of 41
Tax 30 21
DTA Reverse 90k
Bal Tax Pay 301

3 Recognition of DTA 4 DM

DTA DTA are elf only to the extentthere is

recognised
reasonable

certainty of their realisation i e future expected profit

2 DTA arising due to unabsorbed deprn or elf losses should be

recognised only when there is virtual certainty supported by

 convincing evidence that sufficient future taxable profit will
be available against which such DTA can be realised
c

eg future exportorders
projection of futureprofits madebyenterprise etc

DM There are no conditions to recognise DTL

pre

Summary of Recognition
c

DM ITA
No conditions created due to
any other
for Recog unabsorbed depr reason
elf losses
virtuhl reasonably
certainty certainty
confulncing
evidence
of
future
of future profits profit

4 DT implication in section 80 IA 4 80 IB of income tax Act

eg
ur TodayperiodI 1
I 2 s n s o i a
DTA 100 150
create 180
10110111 110

et Create 20 150 4 1
 DTA IN respect of timing diff which reverse during tax holiday period
should not berecognised

timing diff which originate first should be considered to reverse first

CDR elf 120000 XW

Illus 3 losses 98000
0008101
31.3 1 31.3 2 31.3.73
Profit loss 200,000 100000 120000

DTA 40 80000 40000 40000

DHA Reverse DTAReverse
Carr Tax to bepaid 8000

Profit loss afterTax 1200001 60000 72,000

Illuse CPR É fÉg

to
400

i ii
Timing 200

Timing f
Diff
40

D T L 208
Illus9 CDR

In Tax Books Yer Er

Profit 41
CapGain 2010.8 er

In Ale's
Cost of Invest 10W
less sale
Net
1811
carrying Amt

Particulars Alc's Tax Diff

Income Mil 40 Her DTA 40
Income a
Profit
Aaj tax
Future mein Kum
Illus 2
Tax Exp
Current Tax 26250
Deffered Tax liab 108000 1134250

Def Tax
A c's Tax Diff DT 20
Income 600000 60000 540000 108000 DTL
Profit 1
Tax
Future mein
zyda

Curr Tax
c Taxable profit Tax Rate
60000 20 12000 whichever is
higher
ii Bookprofit MAT Rate 26250
350000 7.5

Review DTA
unrecog
At each balance sheet, date Company should reassess unrecognised
DTA. If future taxable pro t is now reasonably certain, then company
can record previous years unrecognised DTA.

a
 Tax Rates for Carr Tax Def tax
For cur Tax use Tax Rate that is applicable to currperiod

For Def Tax Use future tax rate if announced proposed in war year

If not available then use curr year rate

eg.CL 24 25
In 24 25
Tax Rate 30 govt proposed 357 rate forfuture years

AEier Tax 30
Def tax 357

x x x x