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% (small companies ≤ ₹400 cr turnover), or 30% (default), each with applicable surcharge (7-12%) and 4% Health & Education Cess. For Section 115BAA companies, the effective rate is approximately 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: use 22% basic = 25.17% effective (with 10% surcharge + 4% cess). This option is irrevocable once exercised. (2) If a domestic company with turnover ≤ ₹400 cr in previous year: 25% basic = effective ~27% with surcharge and cess. (3) Default domestic rate: 30% basic = effective ~31.2% (small) or ~34.94% (with 12% surcharge for income > ₹10 cr). (4) New manufacturing under Section 115BAB: 15% basic = 17.16% effective. (5) Foreign company: 35% basic. 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.

MAT under Section 115JB is computed at 15% of book profit (plus surcharge and cess) when a company's regular tax liability is lower. MAT credit (excess MAT over regular tax) can be carried forward 15 years and set off when regular tax > MAT. The MAT credit is recognised as a Deferred Tax Asset under AS 22 / Ind AS 12, subject to the same recoverability test as carry-forward losses. Companies under Section 115BAA / 115BAB (concessional rates) are NOT subject to MAT and cannot avail MAT credit set-off. If a company switches into 115BAA, any accumulated MAT credit is forfeited.