What is deferred tax liability? what items come under deferred tax liability?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 kruthika asked almost 3 years ago

Hi I want to know, What is deferred tax liability? what items come under deferred tax liability?

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2 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered almost 3 years ago

There may be a difference in the way certain items of expense are allowed to be treated for tax purposes and how a company actually treats them. Tax laws allow a 100% depreciation in the first year after a company acquires certain assets, a form of accelerated depreciation. But a company may actually write off the depreciation over a larger number of years in its financials. The company may charge depreciation at lower rates than allowed under tax laws. Or it may use a different method of charging depreciation.

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Open uri20170510 32134 1uwcnoc?1494421631 Shubhangi Jain answered almost 3 years ago

When a company creates a provision for deferred tax liability in its profit statement, it show that it has postponed part of the tax due on that year's transaction to the future. The deferred tax liability serves the purpose of a reserve, which will be drawn down in the future years to meet the company's higher tax liability in those years. Situations in which there is a deferred tax liability... ======================================================== There may be a difference in the way certain items of expense are allowed to be treated for tax purposes and how a company actually treats them. - Tax laws allow a 100% depreciation in the first year after a company acquires certain assets, a form of accelerated depreciation. But a company may actually write off the depreciation over a larger number of years in its financials. The company may charge depreciation at lower rates than allowed under tax laws. Or it may use a different method of charging depreciation. - Tax laws may allow a company to deduct certain expenses in full in a single year, but it may charge the expenses against profits for the purposes of reporting to its shareholders.

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