Core concepts
- 01Current tax + Deferred tax = Total tax expense.
- 02Deferred tax based on temporary differences (balance sheet approach).
- 03Taxable temp diff → DTL; deductible temp diff & unused losses → DTA.
- 04DTA recognised only if probable that future taxable profit will be available.
- 05Tax base = amount attributable to asset/liability for tax purposes.
Flowchart
Deferred Tax Approach | Carrying Amount vs Tax Base | Difference = Temporary Difference | +-- Taxable -> DTL +-- Deductible -> DTA (if recoverable) | Apply enacted/substantively enacted rate
Exam-critical pointers
- ⭐Permanent differences (e.g., disallowance under IT Act) — no deferred tax.
- ⭐DTA on carry-forward losses requires convincing evidence of future taxable income.
- ⭐Tax effect of business combinations adjusted in goodwill / bargain purchase.
- ⭐Ind AS 12 differs from AS 22 — balance sheet vs P&L approach; AS 22 used income statement approach.
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