Please Help: prov for tax

Posted Date : 01-Oct-2011 , 09:38:54 pm | Posted By sanjeev

Sir,
prov of tax means kya hota hai explain with example .

Category : Income Tax | Answers : 1 | Comments : 6 | Hits : 428

Answers

Answer By: Ashish Karundia

Dear Sanjeev,

Provision for tax means provision made in the books of accounts for tax that a person is liable to pay to the government.

Comments

You need to be logged in to post comment

Chetan Agrawal

03-Oct-2011 , 03:24:21 pm

Dear Sanjeev, provisions for any expense is made in the case where the exact amount of the expense is not known at the time when exense is to be recorded in the books of accounts in the year to which this expense relates. For example- at the time when we finalize our balance sheet, we don,t know the exact amount of the income tax that we required to pay to the income tax department as the same depands upon the assessement made by the department. At the time of finalization of balance sheet we compute our income tax liabilty for that year on our own and make provision for the same with that amount in the books. Thereafter, when the Income tax department complets the our assessement in the following year and confrims the amount of tax then we set off the tax amount with the prvision we made,in this regard in the earlier year. let's say for AY-2010-11 we make provision of Rs. 10,000 for Income Tax. In the FY 11-12 AO makes the assessment for yhe AY 2010-11 and determines the final tax liabilty Rs. 11,000. Now we will adjust prvision of RS. 10000 made earlier, against this liabilty, in FY-11-12 and for balance tax liabilty of Rs. 1000 will be debited to P&L a/c of the FY-11-12

Chetan Agrawal

03-Oct-2011 , 03:32:57 pm

Assessment Year 2010-11- Provision for Tax A/c Dr. 10000 To P& L A/c 10000 Advance Income Tax A/c Dr. 10000 To Bank A/c 10000 Financial Year 2011-12 (year in which assessment made tax finally determined Rs. 11000) Income Tax Expense A/c Dr. 11000 To Income Tax Payable A/c 10000 Income Tax payable A/c Dr. 11000 To Advance Tax 10000 To Bank A/c 1000 Provision for Tax A/c Dr. 10000 P&L A/c Dr. 1000 Income Tax Expense A/c 11000

CA VIPIN GARG

03-Oct-2011 , 04:19:38 pm

Dear Chetan Ji, I think you have not understood the question of Sanjeev correctly because he just asking MEANING OF PROVISION OF TAX and nothing else. In my opinion it has been correctly answered by Ashish Ji.

Chetan Agrawal

04-Oct-2011 , 12:21:45 pm

Dear Vipin Ji, i to agree with u that i might have not understand the question of Sanjeev. But what I understand was that Sanjeev was asking to explain meaning along with an example and that what i have done and if he was asking only the meaning than he has would have not asked to explain the same by an example. And also i have not commented other than what explained by Dear Ashish Ji.