3/11/2014

Income TAx provision accounting entries

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Home > Experts > Accounts > Income TAx provision accounting entries

Income TAx provision accounting entries

(Accounts)
This query is : Resolved
Can anyone give me the deatil list of acounting entries to be passed for provision
of Income tax.alongwith the advance tax paid and TDS receivable.
Whether the entries for provision of TAx are shown net of advance tax, tds
receivable, provision written back etc or the advance tax,TDS is shown separate?
Monil Shah
( Author )
08 April 2009

For making provision

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Profit and loss account Dr

To Provision for income tax

For tranferring advance tax and tds

CA.
B.SRINIVASULU
( Expert )
08 April 2009

Provision for income tax Dr

To Tds
To Advance tax
If TDS or advance tax shows debit balance then
Income tax refundable
To TDS
To Advance tax
If after passing all entries provision for income tax shows credit balance
Provision for income tax Dr
To self assessement tax payable
On payment
Self assessement tax a/c Dr
To bank

i support the expert...

but the adjusting entry of tds/ adv tax is to be passed on completion of
assessment...

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CA Devanshi
Gandhi (Ajani)
( Expert )
10 April 2009

CAclubindia
Like You like this.

What is the accounting entry for income tax refund received by company.

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Where to show the income tax refundable as indirect Income or to reduce the
provision for the current year by that amount. Please confirm
Monil Shah
( Author )
23 April 2009

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3/11/2014

23 April 2009

Rajdeep Pawar
( Expert )
26 May 2009

Income TAx provision accounting entries

Accounting Treatment relating to Income Tax is as follows:

(1) At the time of paying advance tax:
Advance Income Tax Paid A/c Dr.
To Bank A/c
(2)At the time of making provision for Income tax Liability:
Profit & Loss A/c Dr.
To Provision for Income Tax A/c
From here onwards you will have to make proper assessment year wise
reconciliation of both the accounts ie Advance Income Tax Paid A/c & Provision for
Income Tax A/c. This is to be noted that every Assessment Year is separate in
Income Tax.
(This is to be noted that in case of an assessee who is not in default Advance
Tax deposited will always be greater or equal to Provision for Income Tax.
Provision for Income Tax is nothing but current Tax as per the AS-22.)
(3) At the time of making self assessment payment, the entry will be same as in
(1) but the narration will mention that it is a self assessment tax for the AY 200XXX.
(4) when the Assessment gets completed there are few situations arises:
(a)when our income is assessed without making any disallowance & charging
any interest :
Provision for Income Tax A/c Dr.
To Advance Income Tax Paid
(with the amount of Provision for Income Tax for the AY 200X-XX)
(b) when our income is assessed without making any disallowance but after
charging interest eg u/s 234 : In this case the AO will issue the Demand letter
u/s 156 for the payment of tax calculated under assessement , because as per
rule tax paid is first adjusted towards the amount of interest due. He can also
adjust this amount with any other refund which might due to you in respect of
any other Assessment Year.
Along with the entry passed under situation (a) , the following entries will be
passed
Interest Paid Others A/c Dr.
To Bank A/c
In case it is adjusted with the refund of any other Assessment Year, then the
entry will be:
Interest Paid Others A/c Dr.
To Advance Income Tax Paid
In this case you must make it sure that the narration clearly mentions the
assessment year of which refund is adjusted against the demand. Also you will
have to make proper adjustment in your reconciliation of Advance Income Tax A/c
& Provision for Income Tax A/c iro concerned AY.
(c) When Income is assessed with some disallowance & Interest payable:
This means that we have to pay tax demanded by AO.
(i) Income Tax Provision A/c Dr.
To Advance Income Tax Paid A/c
(with the amount provided for the respective Assessment Year)
(ii) Income Tax Provision for earlier years Written Back A/c Dr.
Interest paid Others A/c Dr.
To Bank A/c (if paid through Bank)
To Advance Income Tax Paid A/c (if adjusted by AO with refund of other AY)
(with the amount of Additional Income Tax Liability arises on assessment &
Interest payable )
# This is to be noted that refund is not an Income from the Assessee point of
view, However the interest received on refund is indirect income to be shown
under other incomes.
In (ii) Case, if there is interest on refund which is also adjusted with the tax
demand then the entries will be:
Income Tax Provision for earlier years Written Back A/c Dr.
Interest paid Others A/c Dr.
To Bank A/c (if paid through Bank)
To Advance Income Tax Paid A/c (if adjusted by AO with refund of other AY)
To Other Income (with amount of Interest recd. on refund which is adj. against
tax demand)
(with the amount of Additional Income Tax Liability arises on assessment &
Interest payable )
Note:- This is to be noted that in case tax on returned income is not equal to
Current Tax Provision for the year, then you will have to pass the following
entries to make it equal to tax on returned income (Reason for inequality may be
the mistake or error that might have occurred at the time of making provision).
Case (a) When tax on returned income is more:
It means you have made less provision for the Assessment Year, now you have
to make the remaining provision. Now the entry will be:
Income Tax Provision for earlier years Written Back A/c Dr.
To Provision for Income Tax A/c
Case (b) When tax on returned income is less:
Just pass the reverse entry as passed in case (a)

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3/11/2014

Income TAx provision accounting entries

Mr Rajdeep
Thank very much for your detailed reply.
What will be the entries if there is following case:Monil Shah
( Author )
27 May 2009

1.Income as per Return - 100

2.Assessed Income- 120
3.Provison for tax- 30
4.Advance tax paid-40
4.Assesed tax after some disallowance-35
5.Assestment order- Refund of 5(Including interest 0.5)
What will be the entry for refund received from income tax?
Please help

The following entry will be passed at the time of completion of Assessment:

Rajdeep Pawar
( Expert )
29 May 2009

Provision for Tax A/c Dr. 30

Taxation of Earlier Yr Dr. 5
Bank A/c Dr 5.5
To Advance Tax Paid A/c 40
To Interest Recd.-Others 0.5
(Being Entry passed on the completion of Assessment for the AY 20XX-XX)

Thanks Mr Rajdeep
Lastly Where will be the head - taxation of earlier year a/c (Dr balanace) will be
shown in Balancesheet.
Monil Shah
( Author )
30 May 2009

It is a P&L item & not a balance sheet item. Bal. of this account will be expensed
out.

Rajdeep Pawar
( Expert )
30 May 2009

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Income TAx provision accounting entries

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