Timing differences between accounting and taxation income: Permanent timing differences: These differences does not reverse with time. For eg. weighted deduction for scientific research expenses or bonus depreciation allowance for manufacturing companies. The excess expenses considered in income tax does not get reversed in future date and hence no accounting treatment need to be given for these differences. Temporary timing differences : These difference get reversed in future period and this creates deferred tax asset/liability in accounting books. DTA(Deferred tax Asset): If income is taxed in current year but it will be accounted in future years it gives rise to DTA. If expense is booked in current year but it will be allowed in future years then also it gives rise to DTA. Eg. Preliminary expense booked in current year will be allowed as deduction in 5 years term. Cases where expense deduction is allowed on payment basis in IT and expenses are paid after filing of return. DTL (deferred tax liability): If income is booked in current year but taxable in future years or if expense is allowed in current year but it will be booked in future years, this give rise to DTL. For eg. Depreciation difference, taxation laws allows higher depreciation expense in initial years.
Posted on: Thu, 01 Aug 2013 10:08:41 +0000
Trending Topics
Recently Viewed Topics
© 2015