Deferred Tax
Calculator India

Deferred tax is the tax effect of timing differences (AS 22) or temporary differences (Ind AS 12) between book profit and taxable income. A Deferred Tax Liability (DTL) arises when book profit > taxable income in the current period (tax will be paid later — e.g. tax depreciation > book depreciation).

A Deferred Tax Asset (DTA) arises when book profit < taxable income (tax already paid for an expense not yet allowed for accounting — e.g. provision for bad debt disallowed until written off). Both are recognised in the balance sheet, offset where the same taxation authority is involved.

Deferred Tax = Temporary Difference × Applicable Tax Rate. Temporary Difference = Book Value − Tax Base (for an asset) OR Tax Base − Book Value (for a liability).

Use the company's enacted tax rate: 22% (Section 115BAA), 25% (turnover ≤ ₹400 crore), or 30% (default), each with the applicable surcharge and 4% Health & Education Cess. For Section 115BAA companies the effective rate is 25.17% (22% × 1.10 surcharge × 1.04 cess).

Use the calculator above to plug in your line items and see the net DTA/DTL.

Depreciation is the most common deferred tax driver. Books typically use Straight Line Method (SLM) per Schedule II of Companies Act 2013.

Tax uses Written Down Value (WDV) per Section 32 with prescribed rates (15% for plant & machinery, 10% for buildings, etc.). In early years, tax depreciation usually exceeds book depreciation — the WDV of the asset on the tax books is LOWER than the carrying amount on financial books, creating a taxable temporary difference and a Deferred Tax Liability (DTL).

Example: a plant costs ₹100 lakh; book WDV after year 1 is ₹90 lakh (10% SLM); tax WDV is ₹85 lakh (15% WDV). Difference = ₹5 lakh × 25.17% = ₹1.26 lakh DTL.

Section 43B of the Income Tax Act 1961 disallows certain expenses unless ACTUALLY PAID before the due date for filing the income tax return. Items covered: taxes, duties, cess, employee contribution to provident / superannuation / gratuity fund, leave encashment, bonus, commission, interest on loans from public financial institutions or scheduled banks, sums payable to MSME suppliers (Section 43B(h) effective FY 2023-24).

When an expense is accrued in books but unpaid, it reduces book profit but is added back to taxable income — creating a Deferred Tax Asset (recoverable in the year the expense is actually paid). The DTA reverses when payment happens.

Yes, but only to the extent of 'virtual certainty supported by convincing evidence' (AS 22 para 17) or 'probable that taxable profit will be available' (Ind AS 12 para 34). This is a high bar — auditors typically require: (a) a strong order book or contractual revenue stream, (b) an evidence-backed business plan showing future taxable profits, (c) eight-year carry-forward window remaining (Section 72 — non-speculation losses) or four-year for speculation/unabsorbed depreciation losses (Sections 32, 73, 73A, 74, 74A).

Continuing operating losses generally preclude DTA recognition. Unrecognised DTA is reassessed each balance sheet date.

Match the rate at which the temporary difference is expected to REVERSE. (1) If the company has opted into Section 115BAA: 22% base = 25.17% effective (flat 10% surcharge + 4% cess). This option is irrevocable once exercised. (2) A domestic company with turnover ≤ ₹400 crore in the SPECIFIED prior year — FY 2023-24 for AY 2026-27, not the immediately preceding year: 25% base = 26.00% to 29.12% effective, depending on the surcharge band. (3) Default domestic rate: 30% base = 31.20% up to ₹1 crore of income, rising to 34.94% with the 12% surcharge above ₹10 crore. (4) New manufacturing under Section 115BAB: 15% base = 17.16% effective. (5) Foreign company: 35% base.

Use the rate expected to apply when the deferred tax reverses, not necessarily the current rate.

Both standards account for income tax effects of temporary differences, but the framework differs. AS 22 is INCOME STATEMENT-based — uses 'timing differences' between book and taxable income.

Ind AS 12 is BALANCE SHEET-based — uses 'temporary differences' between book carrying amount and tax base. Practical implications: (1) Ind AS 12 catches differences AS 22 misses, such as revaluation of PPE, business combinations, undistributed profits of subsidiaries. (2) Ind AS 12 requires deferred tax on initial recognition of certain assets — AS 22 does not. (3) Ind AS 12 prohibits discounting; AS 22 is silent. (4) AS 22 recognises DTA on losses only with 'virtual certainty'; Ind AS 12 uses 'probable'.

Companies on Ind AS roadmap (₹250+ cr net worth) follow Ind AS 12; others follow AS 22.

The answer changed on 1 April 2026, and a schedule rolled forward from last year will get it backwards. FOR AY 2026-27 (income of FY 2025-26 — the return being filed now): MAT is 15% of book profit under Section 115JB of the Income-tax Act 1961 where regular tax is lower; the credit, being the excess of MAT over regular tax, carries forward 15 years and is recognised as a Deferred Tax Asset subject to the same recoverability test as carry-forward losses; and companies under Sections 115BAA / 115BAB are outside MAT, so switching in forfeits accumulated credit.

FROM TAX YEAR 2026-27 (FY 2026-27, the year now running), MAT sits in Section 206 of the Income-tax Act, 2025 and the Finance Act 2026 rationalised it: the rate falls to 14%, and MAT in the old regime becomes a FINAL TAX, so no fresh MAT credit accrues to any domestic company. Credit banked up to 31 March 2026 survives — but the set-off rule inverts.

It can now be used ONLY in the concessional regime, capped for domestic companies at 25% of regular tax liability in a year, and for foreign companies at the excess of normal tax over MAT. So the move into 115BAA that used to destroy the credit is now the only way to use it.

Two consequences for deferred tax: stop recognising a DTA for MAT credit ARISING in tax year 2026-27 or later, because none arises; and re-test any existing MAT-credit DTA against the 25% annual cap and against the regime it can actually be used in. Since deferred tax is measured at the rate expected on reversal, a reversal falling in tax year 2026-27 or later is measured at 14%, not 15%.

This is recent law — confirm your position on incometax.gov.in before finalising accounts.

No. Deferred tax arises only on timing (AS 22) or temporary (Ind AS 12) differences, which reverse in a later year. An expense the tax computation disallows for good, such as a penalty for breaking the law, never reverses, so it raises this year's current tax and creates no DTA.

When you work from the income-tax computation, sort every add-back and deduction into "reverses later" (deferred tax) or "never reverses" (none) before multiplying by the rate.

Book the MOVEMENT, not the closing balance. In the worked example on this page the closing net DTL is ₹75,510 (₹3,00,000 × 25.17%) against an opening DTL of ₹50,000, so the entry is: Deferred tax expense (P&L) Dr ₹25,510, To Deferred Tax Liability ₹25,510.

If the net position falls, reverse it: DTL Dr, To Deferred tax income. Under Ind AS 12 the part relating to items in other comprehensive income (such as a revaluation surplus) goes to OCI, not P&L.

In short, for AY 2026-27 (FY 2025-26) a domestic company measures deferred tax at 25.17% under Section 115BAA (22% + 10% surcharge + 4% cess), 17.16% under Section 115BAB, 26.00%–29.12% at the 25% rate (turnover ≤ ₹400 crore in FY 2023-24) and 31.20%–34.94% at the 30% rate, the range set by the surcharge band its total income falls in. Use the rate expected when each difference reverses: a difference reversing in tax year 2026-27, the first year under the Income-tax Act 2025, stays at the same 25% / 30% base rates under the Finance Act 2026, but MAT credit rules changed (see the MAT section on this page).

List every asset and liability whose book value differs from its tax base, and work out the gap. An asset whose book value is above its tax base (typically plant and machinery after faster tax depreciation) gives a DTL; an expense the books have charged but tax allows only later (unpaid bonus, a doubtful-debt provision) gives a DTA.

Multiply each gap by the rate expected on reversal. In this page's example at 25.17%: a ₹8.00 L depreciation difference gives a DTL of ₹2,01,360, ₹5.00 L of disallowed provisions gives a DTA of ₹1,25,850, and the net is a DTL of ₹75,510.

Book the DTL as Profit & Loss A/c Dr, To Deferred Tax Liability A/c, and the DTA as Deferred Tax Asset A/c Dr, To Profit & Loss A/c.