## Calculating Deferred Tax: The Standard 4-Column Method
Every AS 22 DT calculation uses the same framework. Practise this until it is automatic.
### The 4-Column Table
| Particulars | Books (Accounting) | Tax | Difference | DT @ [Rate]% → DTA or DTL | ||||
|---|---|---|---|---|---|---|---|---|
| Item name | Book amount | Tax amount | Book − Tax | or | Tax − Book | Diff × Rate → classify |
---
### Classification Rule (Expense Items)
| Comparison | Who paid more tax? | Create |
|---|---|---|
| Tax expense > Book expense | Paid less tax today (tax got more deduction) | DTL |
| Book expense > Tax expense | Paid more tax today (book got more deduction) | DTA |
### Classification Rule (Income/Revenue Items)
| Comparison | Who paid more tax? | Create |
|---|---|---|
| Tax income > Book income | Paid more tax today | DTA |
| Book income > Tax income | Paid less tax today | DTL |
---
### The Universal Test (works for both expenses and income)
> Step 1: Compare tax actually paid vs. book tax expense.
> Step 2: Paid MORE tax today → DTA. Paid LESS tax today → DTL.
---
### Netting DTA and DTL
When a company has both timing differences in the same year:
- Compute each item's DT separately
- Net them on the P&L (DTL − DTA = net charge, or DTA − DTL = net credit)
- Each balance sheet line (DTA account, DTL account) moves independently
---
### Profit Statement Presentation (Ques 2 style)
```
Profit Before Depreciation & Tax: ₹6,40,000
Less: Depreciation (as per books): ₹2,80,000
Profit Before Tax: ₹3,30,000
Less: Tax Expense
Current Tax: ₹1,32,000
Deferred Tax (net): NIL ₹1,32,000
Profit After Tax: ₹1,98,000
```
Working Note — Deferred Tax:
| Particulars | Books | Tax | Difference | DT @ 40% |
|---|---|---|---|---|
| Depreciation (asset 1) | 2,80,000 | 1,90,000 | 90,000 | 36,000 DTA |
| Depreciation (asset 2) | 30,000 | 1,20,000 | 90,000 | 36,000 DTL |
| Net | NIL |
When two depreciation differences perfectly offset, net deferred tax = 0.