Is deferred tax allowable expense?

Is deferred tax allowable expense?

treated as deferred revenue expenditure in the books). Expenses paid without deducting TDS will not be allowed for tax purpose and will be allowed after deducting TDS on that. accrued in the statement of profit and loss on mercantile basis but allowed for tax purposes in subsequent years on payment basis.

What is the difference between current tax expense and deferred tax expense?

Current tax for current and prior periods is, to the extent that it is unpaid, recognised as a liability. A deferred tax asset arises if an entity: will pay less tax if it recovers the carrying amount of another asset or liability; or. has unused tax losses or unused tax credits.

What is mat in income tax?

MAT stands for Minimum Alternate Tax, and it was launched to reduce (if not to bridge) the gap between the tax accountability as per income calculation and book profits.

Why are deferred taxes recorded on the balance sheet?

A deferred income tax is a liability recorded on a balance sheet resulting from a difference in income recognition between tax laws and the company’s accounting methods. For this reason, the company’s payable income tax may not equate to the total tax expense reported.

Can DTA and DTL be set off?

Both DTA and DTL can be adjusted with each other provided they are legally enforceable by law and there is an intention to settle the asset and liability on a net basis.

What is the difference between tax payable and tax expense?

The tax expense is what an entity has determined is owed in taxes based on standard business accounting rules. The tax payable is the actual amount owed in taxes based on the rules of the tax code. The payable amount is recognized on the balance sheet as a liability until the company settles the tax bill.

What is MAT credit?

What is MAT Credit? When any amount of tax is paid as MAT by the company, then it can claim the credit of such tax paid in accordance with the provision of section 115JAA. Allowable Tax Credit: Tax paid as per MAT calculation — Income tax payable under normal provision of Income-tax Act, 1961.

What is the treatment of deferred tax under Mat?

The treatment of deferred tax charge in determining the tax liability under the special provisions of Section 115JB of the Income-Tax Act is one such case. Section 115JB levies minimum alternate tax (MAT) at 10% of book profits (plus surcharge and cess thereon) if such tax is higher than the tax payable under the normal provisions of the Act.

How is mat tax calculated under the Income Tax Act?

MAT tax is paid as per section 115JB of the Income Tax Act and computed as per the book profit of the entity. Whether DTL debited to Profit & Loss must be included in the book income for calculating MAT is still a controversial topic.

Which is a benefit of payment of mat?

But payment of MAT would give the company a benefit. Since the Company is liable to pay MAT, the company can avail the difference of the tax payable as per MAT and tax payable as per Normal Provisions as MAT Credit. For More information on MAT Credit, refer to this article.

Which is a normal provision for the form of mat?

The above entry is just a normal provision for the direct taxes payable, in this case in the form of MAT. But payment of MAT would give the company a benefit. Since the Company is liable to pay MAT, the company can avail the difference of the tax payable as per MAT and tax payable as per Normal Provisions as MAT Credit.