University · Calculators

Deferred Tax (AS 22 / Ind AS 12) Calculator.

Compute Deferred Tax Asset (DTA) and Deferred Tax Liability (DTL) from book-vs-tax base differences. Default items pre-populated for a typical Indian company; adjust per engagement.

Items + book vs tax base

Item	Diff	Type	DTA	DTL
PPE — book WDV vs IT WDV	₹15,00,000	DTL	—	₹3,77,550
Provision for gratuity (allowed on payment)	₹5,00,000	DTL	—	₹1,25,850
Provision for leave encashment	₹3,50,000	DTL	—	₹88,095
Provision for bonus (43B carve-out)	₹2,00,000	DTL	—	₹50,340
Provision for doubtful debts	₹4,00,000	DTL	—	₹1,00,680
Carry-forward of unabsorbed depreciation / losses (tax base only)	₹-20,00,000	DTA	₹5,03,400	—
Total			₹5,03,400	₹7,42,515

Assumptions

Applicable income-tax rate (%)

Use the marginal effective rate that will apply when the timing difference reverses (typically 25.17% for new regime, 30%+ for old regime + surcharge / cess).

Recoverability of DTA — virtually certain / reasonably certain?

AS 22 / Ind AS 12 requires DTA recognition only when sufficient future taxable income is probable. For unabsorbed depreciation / losses, virtual certainty supported by convincing evidence is required.

Result

Total DTA (gross)₹5,03,400

Total DTL (gross)₹7,42,515

Net deferred tax₹-2,39,115

Net DTL — disclose as non-current liability in BS.

How deferred tax works.

AS 22 uses a timing-difference approach (P&L view); Ind AS 12 uses the temporary-differenceapproach (BS view). Both compute deferred tax on items where the book recognition timing differs from the tax recognition timing — depreciation (book = Sch II, tax = Section 32), provisions disallowed on book basis but allowed on payment (gratuity, leave, bonus — Section 43B), carry-forward losses.

Recoverability is the auditor’s key challenge: DTA on regular timing differences requires “reasonable certainty” of future taxable income; DTA on carry-forward losses / unabsorbed depreciation requires “virtual certainty supported by convincing evidence.” Forecasts + tax planning + history of taxable profits are the standard evidence.

On CORAA

Deferred tax audit-evidence and rate / recoverability working papers run through the Working Papers hub; tie to Deferred Tax Liabilities WP template.

Deferred Tax WP template More calculators

How deferred tax works under AS 22 / Ind AS 12

Deferred tax arises because the rules for computing taxable profit differ from the rules for computing accounting profit. Items recognised in the financial statements may be recognised at a different time, or in a different amount, for tax purposes. These differences are either temporary (will reverse in future periods) or permanent (will never reverse). Only temporary differences give rise to deferred tax.

Under Ind AS 12 (Income Taxes), the balance sheet approach is followed: compare the carrying amount of each asset / liability with its tax base. The difference is a temporary difference, multiplied by the applicable tax rate to get the deferred tax. Taxable temporary differences create a Deferred Tax Liability (DTL); deductible temporary differences create a Deferred Tax Asset (DTA), subject to recoverability test (Section 5.27-5.36 of Ind AS 12).

Under AS 22 (for non-Ind AS entities), the income-statement approach was historically used (timing differences in income vs taxable income). The 2016 amendment to AS 22 added a balance sheet test for re-measurement on tax rate change. DTA is recognised only when there is "virtual certainty" of realisation if backed by losses / unabsorbed depreciation; otherwise "reasonable certainty" suffices.

Worked example — book vs tax depreciation

A company has plant with original cost ₹100 cr, accumulated book depreciation ₹40 cr (book WDV = ₹60 cr), and accumulated tax depreciation ₹55 cr (tax WDV = ₹45 cr). Tax rate is 25.17% (Section 115BAA).

Inputs

Book carrying amount₹60 Cr

Tax base (tax WDV)₹45 Cr

Temporary difference₹15 Cr (taxable)

Applicable tax rate25.17%

Output

Deferred Tax Liability₹3.78 Cr

P&L impactDTL increase = tax expense

BS classificationNon-current liability (Schedule III)

Tax depreciation exceeded book depreciation by ₹15 cr cumulatively → the tax has been "deferred" — future tax outflows will be higher than future book depreciation expense. The DTL = ₹15 cr × 25.17% = ₹3.78 cr. As the asset depreciates further, tax depreciation slows (block-WDV converges to nil) while book depreciation continues — the DTL gradually unwinds.

Common mistakes

Netting DTA and DTL across entities

Ind AS 12 para 74 / AS 22 para 29 — DTA and DTL can be offset only when: (a) there is a legally enforceable right to set off current tax assets against current tax liabilities, AND (b) the deferred taxes relate to income taxes levied by the same taxation authority. Cannot net across subsidiaries in consolidation unless both conditions met for the consolidated entity.

Recognising DTA without recoverability assessment

DTA is recognised only to the extent that it is probable (Ind AS 12) or reasonably certain (AS 22) that future taxable profit will be available against which the unused tax losses / credits / deductible temporary differences can be utilised. For losses, evidence required: reversing taxable temporary differences, tax planning opportunities, future profitability forecasts.

Using the wrong tax rate

Ind AS 12 / AS 22 require use of the tax rate "enacted or substantively enacted by the reporting date". For Indian companies, this is the rate applicable for the year of reversal — typically 25.17% (under Sec 115BAA) for domestic companies that have opted in, 22% for new manufacturing companies under Sec 115BAB. Use the rate that will apply when the difference reverses.

Ignoring the MAT credit angle

Minimum Alternate Tax (MAT) credit under Section 115JAA can be carried forward for 15 years and set off against future regular tax. Under Ind AS, MAT credit is presented as a deferred tax asset (subject to recoverability) per Ind AS 12. Under AS 22, the treatment was via a separate balance under "MAT Credit Entitlement" — disclosed separately.

Missing the OCI / direct-equity classification

Tax on items credited / charged to OCI must also flow through OCI (Ind AS 12 para 61A). Common examples: deferred tax on revaluation gains, on actuarial remeasurement under Ind AS 19, on cash-flow hedge reserves. Companies often route everything through P&L by default — wrong.

Frequently asked questions

What is the difference between AS 22 and Ind AS 12?+

AS 22 follows the income-statement approach (timing differences between accounting income and taxable income). Ind AS 12 follows the balance-sheet approach (temporary differences between carrying amounts and tax bases of assets / liabilities). Ind AS 12 covers a broader set of differences, including those that don't go through P&L (e.g., revaluation reserve, OCI items, business combinations).

What is a permanent vs temporary difference?+

A permanent difference is one that will NEVER reverse — items recognised in accounting income but never taxable (e.g., dividend income that is exempt under Sec 10(34)), or expenses recognised in accounting but never deductible (e.g., CSR under Sec 37 Explanation 2). Temporary differences will reverse in future periods (e.g., depreciation timing differences).

When is a Deferred Tax Asset recognised?+

DTA is recognised for deductible temporary differences, carry-forward unused tax losses, and unused tax credits — to the extent that it is probable (Ind AS 12) or reasonably certain (AS 22, virtually certain if from losses) that future taxable profit will be available to utilise them. Recoverability assessment is required at each reporting date.

What tax rate is used for deferred tax?+

The rate enacted or substantively enacted by the reporting date for the year(s) when the temporary difference is expected to reverse. For Indian domestic companies that opted into Sec 115BAA (concessional 22% + surcharge 10% + cess 4% = 25.168%), all deferred tax is measured at this rate. Different rates may apply if specific income types (capital gains, dividends) are taxed differently in the year of reversal.

How is MAT credit treated?+

Under Ind AS, MAT credit entitlement (carry forward under Sec 115JAA) is treated as a deferred tax asset subject to the same recoverability test as other DTAs. Under AS 22, it was treated separately under "MAT Credit Entitlement" — but the practical impact is similar.

Is deferred tax on revaluation reserve credited to P&L?+

No — the corresponding deferred tax follows the original transaction. If the revaluation is credited to OCI (Ind AS 16) or revaluation reserve (AS 10), the deferred tax is also recognised in OCI / equity — not P&L. This applies to all OCI items: actuarial remeasurements, cash flow hedge reserves, FVOCI investments.

Can deferred tax be discounted?+

No — both AS 22 and Ind AS 12 prohibit discounting of deferred tax. The reasoning: predicting the timing of reversal of each temporary difference is impracticable, and undiscounted deferred tax is a more reliable measure.

What is the substantive enactment date?+

In India, the substantive enactment date is generally when the Finance Bill is passed by both houses of Parliament. For tax rate changes announced in the Union Budget on 1 February, the substantive enactment typically occurs in March / April when the Finance Act is passed. Deferred tax balances at 31 March are re-measured if a new rate is substantively enacted by that date.

Authoritative sources

Ind AS 12 — Income Taxes / AS 22 — Accounting for Taxes on Income — Read alongside Section 115BAA (concessional tax regime) and Section 115JAA (MAT credit) of the Income Tax Act 1961.

Always confirm against the latest version of the source. Regulations evolve and amendments are common.

Related calculators

Schedule II Depreciation →Gratuity Calculator →Schedule III Validator →Deferred Tax WP template →

Last reviewed: 2026-05-28 · For informational purposes only — not professional advice.