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Income Taxes

Ind AS - 012 - Rules - B. Indian Accounting Standards (Ind AS) - Companies (Indian Accounting Standards) Rules, 2015 - Ind AS - 012 - Indian Accounting Standard (Ind AS) 12 (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles.) Objective The objective of this Standard is to prescribe the accounting treatment for . The principal issue in accounting for is how to account for the curren .....

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carrying amount will make future tax payments larger (smaller) than they would be if such recovery or settlement were to have no tax consequences, this Standard requires an entity to recognise a deferred tax liability (deferred tax asset), with certain limited exceptions. This Standard requires an entity to account for the tax consequences of transactions and other events in the same way that it accounts for the transactions and other events themselves. Thus, for transactions and other events r .....

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hat business combination or the amount of the bargain purchase gain recognised. This Standard also deals with the recognition of deferred tax assets arising from unused tax losses or unused tax credits, the presentation of in the financial statements and the disclosure of information relating to . Scope 1 This Standard shall be applied in accounting for . 2 For the purposes of this Standard, include all domestic and foreign taxes which are based on taxable profits. also include taxes, such as wi .....

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e following terms are used in this Standard with the meanings specified: Accounting profit is profit or loss for a period before deducting tax expense. Taxable profit (tax loss) is the profit (loss) for a period, determined in accordance with the rules established by the taxation authorities, upon which are payable (recoverable). Tax expense (tax income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax. Current tax .....

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sset or liability in the balance sheet and its tax base. Temporary differences may be either: (a) taxable temporary differences, which are temporary differences that will result in taxable amounts in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled; or (b) deductible temporary differences, which are temporary differences that will result in amounts that are deductible in determining taxable profit (tax loss) of fut .....

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carrying amount of the asset. If those economic benefits will not be taxable, the tax base of the asset is equal to its carrying amount. Examples 1 A machine cost ₹ 100. For tax purposes, depreciation of ₹ 30 has already been deducted in the current and prior periods and the remaining cost will be deductible in future periods, either as depreciation or through a deduction on disposal. Revenue generated by using the machine is taxable, any gain on disposal of the machine will be taxab .....

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diary have a carrying amount of ₹ 100. The dividends are not taxable. In substance, the entire carrying amount of the asset is deductible against the economic benefits. Consequently, the tax base of the dividends receivable is ₹ 100.(a) 5 A loan receivable has a carrying amount of ₹ 100. The repayment of the loan will have no tax consequences. The tax base of the loan is ₹ 100. (a) Under this analysis, there is no taxable temporary difference. An alternative analysis is t .....

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y amount of the revenue that will not be taxable in future periods. Examples 1 Current liabilities include accrued expenses with a carrying amount of ₹ 100. The related expense will be deducted for tax purposes on a cash basis. The tax base of the accrued expenses is nil. 2 Current liabilities include interest revenue received in advance, with a carrying amount of ₹ 100. The related interest revenue was taxed on a cash basis. The tax base of the interest received in advance is nil. 3 .....

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oan will have no tax consequences. The tax base of the loan is ₹ 100. (a) Under this analysis, there is no deductible temporary difference. An alternative analysis is that the accrued fines and penalties payable have a tax base of nil and that a tax rate of nil is applied to the resulting deductible temporary difference of ₹ 100. Under both analyses, there is no deferred tax asset. 9 Some items have a tax base but are not recognised as assets and liabilities in the balance sheet. For .....

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the tax base of an asset or liability is not immediately apparent, it is helpful to consider the fundamental principle upon which this Standard is based: that an entity shall, with certain limited exceptions, recognise a deferred tax liability (asset) whenever recovery or settlement of the carrying amount of an asset or liability would make future tax payments larger (smaller) than they would be if such recovery or settlement were to have no tax consequences. Example C following paragraph 51A i .....

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appropriate tax base. The tax base is determined by reference to a consolidated tax return in those jurisdictions in which such a return is filed. Recognition of current tax liabilities and current tax assets 12 Current tax for current and prior periods shall, to the extent unpaid, be recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess shall be recognised as an asset. 13 The benefit relating to a tax .....

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be recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from: (a) the initial recognition of goodwill; or (b) the initial recognition of an asset or liability in a transaction which: (i) is not a business combination; and (ii) at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). However, for taxable temporary differences associated with investments in subsidiaries, branches and associates, and i .....

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ence and the obligation to pay the resulting in future periods is a deferred tax liability. As the entity recovers the carrying amount of the asset, the taxable temporary difference will reverse and the entity will have taxable profit. This makes it probable that economic benefits will flow from the entity in the form of tax payments. Therefore, this Standard requires the recognition of all deferred tax liabilities, except in certain circumstances described in paragraphs 15 and 39. Example An as .....

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he carrying amount of the asset. The difference between the carrying amount of ₹ 100 and the tax base of ₹ 60 is a taxable temporary difference of ₹ 40. Therefore, the entity recognises a deferred tax liability of ₹ 10 (Rs. 40 at 25%) representing the that it will pay when it recovers the carrying amount of the asset. 17 Some temporary differences arise when income or expense is included in accounting profit in one period but is included in taxable profit in a different p .....

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nil because the revenues do not affect taxable profit until cash is collected; (b) depreciation used in determining taxable profit (tax loss) may differ from that used in determining accounting profit. The temporary difference is the difference between the carrying amount of the asset and its tax base which is the original cost of the asset less all deductions in respect of that asset permitted under taxation laws in determining taxable profit of the current and prior periods. A taxable tempora .....

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already been deducted from taxable profit. The temporary difference is the difference between the carrying amount of the development costs and their tax base of nil. 18 Temporary differences also arise when: (a) the identifiable assets acquired and liabilities assumed in a business combination are recognised at their fair values in accordance with Ind AS 103, Business Combinations, but no equivalent adjustment is made for tax purposes (see paragraph 19); (b) assets are revalued and no equivalen .....

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of the investment or interest (see paragraphs 38-45). Business combinations 19 With limited exceptions, the identifiable assets acquired and liabilities assumed in a business combination are recognised at their fair values at the acquisition date. Temporary differences arise when the tax bases of the identifiable assets acquired and liabilities assumed are not affected by the business combination or are affected differently. For example, when the carrying amount of an asset is increased to fair .....

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s, the revaluation or other restatement of an asset to fair value affects taxable profit (tax loss) for the current period. As a result, the tax base of the asset is adjusted and no temporary difference arises. In other jurisdictions, the revaluation or restatement of an asset does not affect taxable profit in the period of the revaluation or restatement and, consequently, the tax base of the asset is not adjusted. Nevertheless, the future recovery of the carrying amount will result in a taxable .....

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taxable income which exceeds the depreciation that will be allowable for tax purposes in future periods; or (b) tax on capital gains is deferred if the proceeds of the disposal of the asset are invested in similar assets. In such cases, the tax will ultimately become payable on sale or use of the similar assets. Goodwill 21 Goodwill arising in a business combination is measured as the excess of (a) over (b) below: (a) the aggregate of: (i) the consideration transferred measured in accordance wit .....

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llow reductions in the carrying amount of goodwill as a deductible expense in determining taxable profit. Moreover, in such jurisdictions, the cost of goodwill is often not deductible when a subsidiary disposes of its underlying business. In such jurisdictions, goodwill has a tax base of nil. Any difference between the carrying amount of goodwill and its tax base of nil is a taxable temporary difference. However, this Standard does not permit the recognition of the resulting deferred tax liabili .....

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a tax base of nil, paragraph 15(a) prohibits the entity from recognising the resulting deferred tax liability. If the entity subsequently recognises an impairment loss of ₹ 20 for that goodwill, the amount of the taxable temporary difference relating to the goodwill is reduced from ₹ 100 to ₹ 80, with a resulting decrease in the value of the unrecognised deferred tax liability. That decrease in the value of the unrecognised deferred tax liability is also regarded as relating to .....

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ase of the goodwill is ₹ 100 on initial recognition and ₹ 80 at the end of the year of acquisition. If the carrying amount of goodwill at the end of the year of acquisition remains unchanged at ₹ 100, a taxable temporary difference of ₹ 20 arises at the end of that year. Because that taxable temporary difference does not relate to the initial recognition of the goodwill, the resulting deferred tax liability is recognised. Initial recognition of an asset or liability 22 A .....

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(see paragraph 19); (b) if the transaction affects either accounting profit or taxable profit, an entity recognises any deferred tax liability or asset and recognises the resulting deferred tax expense or income in profit or loss (see paragraph 59); (c) if the transaction is not a business combination, and affects neither accounting profit nor taxable profit, an entity would, in the absence of the exemption provided by paragraphs 15 and 24, recognise the resulting deferred tax liability or asset .....

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22(c) An entity intends to use an asset which cost ₹ 1,000 throughout its useful life of five years and then dispose of it for a residual value of nil. The tax rate is 40%. Depreciation of the asset is not deductible for tax purposes. On disposal, any capital gain would not be taxable and any capital loss would not be deductible. As it recovers the carrying amount of the asset, the entity will earn taxable income of ₹ 1,000 and pay tax of ₹ 400. The entity does not recognise th .....

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cial instrument (for example, a convertible bond) classifies the instrument s liability component as a liability and the equity component as equity. In some jurisdictions, the tax base of the liability component on initial recognition is equal to the initial carrying amount of the sum of the liability and equity components. The resulting taxable temporary difference arises from the initial recognition of the equity component separately from the liability component. Therefore, the exception set o .....

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the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that: (a) is not a business combination; and (b) at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). However, for deductible temporary differences associated with investments in subsidiaries, branches and associ .....

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ases, a temporary difference exists between the carrying amount of the liability and its tax base. Accordingly, a deferred tax asset arises in respect of the that will be recoverable in the future periods when that part of the liability is allowed as a deduction in determining taxable profit. Similarly, if the carrying amount of an asset is less than its tax base, the difference gives rise to a deferred tax asset in respect of the that will be recoverable in future periods. Example An entity rec .....

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rying amount, the entity will reduce its future taxable profit by an amount of ₹ 100 and, consequently, reduce its future tax payments by ₹ 25 (Rs. 100 at 25%). The difference between the carrying amount of ₹ 100 and the tax base of nil is a deductible temporary difference of ₹ 100. Therefore, the entity recognises a deferred tax asset of ₹ 25 (Rs. 100 at 25%), provided that it is probable that the entity will earn sufficient taxable profit in future periods to bene .....

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ase; the tax base of the liability is usually nil. Such a deductible temporary difference results in a deferred tax asset as economic benefits will flow to the entity in the form of a deduction from taxable profits when contributions or retirement benefits are paid; (b) preliminary expenses are recognised as an expense in determining accounting profit in the period in which they are incurred but may not be permitted as a deduction in determining taxable profit (tax loss) until a later period(s). .....

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he related costs are not deducted in determining taxable profits until a later period, a deductible temporary difference arises which results in a deferred tax asset. A deferred tax asset also arises when the fair value of an identifiable asset acquired is less than its tax base. In both cases, the resulting deferred tax asset affects goodwill (see paragraph 66); and (d) certain assets may be carried at fair value, or may be revalued, without an equivalent adjustment being made for tax purposes .....

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is measured at fair value. At the end of Year 2, the fair value of the debt instrument has decreased to ₹ 918 as a result of an increase in market interest rates to 5%. It is probable that Entity A will collect all the contractual cash flows if it continues to hold the debt instrument. Any gains (losses) on the debt instrument are taxable (deductible) only when realised. The gains (losses) arising on the sale or maturity of the debt instrument are calculated for tax purposes as the differ .....

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nt by sale or by use, i.e. by holding it and collecting contractual cash flows, or a combination of both. This is because deductible temporary differences are differences between the carrying amount of an asset or liability in the balance sheet and its tax base that will result in amounts that are deductible in determining taxable profit (tax loss) of future periods, when the carrying amount of the asset or liability is recovered or settled (see paragraph 5). Entity A obtains a deduction equival .....

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able that taxable profits will be available against which the deductible temporary differences can be utilised. 3[27A When an entity assesses whether taxable profits will be available against which it can utilise a deductible temporary difference, it considers whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. If tax law imposes no such restrictions, an entity assesses a deductible temporary diffe .....

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g to the same taxation authority and the same taxable entity which are expected to reverse: (a) in the same period as the expected reversal of the deductible temporary difference; or (b) in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. In such circumstances, the deferred tax asset is recognised in the period in which the deductible temporary differences arise. 4[29 When there are insufficient taxable temporary differences relating to the same t .....

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riods, an entity: (i) compares the deductible temporary differences with future taxable profit that excludes tax deductions resulting from the reversal of those deductible temporary differences. This comparison shows the extent to which the future taxable profit is sufficient for the entity to deduct the amounts resulting from the reversal of those deductible temporary differences. (ii) ignores taxable amounts arising from deductible temporary differences that are expected to originate in future .....

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eve this. For example, when an asset is measured at fair value, the entity shall consider whether there is sufficient evidence to conclude that it is probable that the entity will recover the asset for more than its carrying amount. This may be the case, for example, when an entity expects to hold a fixed-rate debt instrument and collect the contractual cash flows.] 30 Tax planning opportunities are actions that the entity would take in order to create or increase taxable income in a particular .....

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e income (such as, in some jurisdictions, a government bond) in order to purchase another investment that generates taxable income. Where tax planning opportunities advance taxable profit from a later period to an earlier period, the utilisation of a tax loss or tax credit carry forward still depends on the existence of future taxable profit from sources other than future originating temporary differences. 31 When an entity has a history of recent losses, the entity considers the guidance in par .....

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nition of an asset or liability 33 One case when a deferred tax asset arises on initial recognition of an asset is when a non-taxable government grant related to an asset is set up as deferred income in which case the difference between the deferred income and its tax base of nil is a deductible temporary difference. In this case, the entity does not recognise the resulting deferred tax asset, for the reason given in paragraph 22. Unused tax losses and unused tax credits 34 A deferred tax asset .....

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sed tax losses is strong evidence that future taxable profit may not be available. Therefore, when an entity has a history of recent losses, the entity recognises a deferred tax asset arising from unused tax losses or tax credits only to the extent that the entity has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which the unused tax losses or unused tax credits can be utilised by the entity. In such circum .....

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ts against which the unused tax losses or unused tax credits can be utilised before they expire; (b) whether it is probable that the entity will have taxable profits before the unused tax losses or unused tax credits expire; (c) whether the unused tax losses result from identifiable causes which are unlikely to recur; and (d) whether tax planning opportunities (see paragraph 30) are available to the entity that will create taxable profit in the period in which the unused tax losses or unused tax .....

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ill allow the deferred tax asset to be recovered. For example, an improvement in trading conditions may make it more probable that the entity will be able to generate sufficient taxable profit in the future for the deferred tax asset to meet the recognition criteria set out in paragraph 24 or 34. Another example is when an entity reassesses deferred tax assets at the date of a business combination or subsequently (see paragraphs 67 and 68). Investments in subsidiaries, branches and associates an .....

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(a) the existence of undistributed profits of subsidiaries, branches, associates and joint arrangements; (b) changes in foreign exchange rates when a parent and its subsidiary are based in different countries; and (c) a reduction in the carrying amount of an investment in an associate to its recoverable amount. In consolidated financial statements, the temporary difference may be different from the temporary difference associated with that investment in the parent s separate financial statements .....

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fference; and (b) it is probable that the temporary difference will not reverse in the foreseeable future. 40 As a parent controls the dividend policy of its subsidiary, it is able to control the timing of the reversal of temporary differences associated with that investment (including the temporary differences arising not only from undistributed profits but also from any foreign exchange translation differences). Furthermore, it would often be impracticable to determine the amount of that would .....

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tax base of its non-monetary assets and liabilities) is determined in a different currency, changes in the exchange rate give rise to temporary differences that result in a recognised deferred tax liability or (subject to paragraph 24) asset. The resulting deferred tax is charged or credited to profit or loss (see paragraph 58). 42 An investor in an associate does not control that entity and is usually not in a position to determine its dividend policy. Therefore, in the absence of an agreement .....

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measured at this amount. 43 The arrangement between the parties to a joint arrangement usually deals with the distribution of the profits and identifies whether decisions on such matters require the consent of all the parties or a group of the parties. When the joint venturer or joint operator can control the timing of the distribution of its share of the profits of the joint arrangement and it is probable that its share of the profits will not be distributed in the foreseeable future, a deferre .....

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tax asset is recognised for deductible temporary differences associated with its investments in subsidiaries, branches and associates, and its interests in joint arrangements, an entity considers the guidance set out in paragraphs 28 to 31. Measurement 46 Current tax liabilities (assets) for the current and prior periods shall be measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enac .....

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ments of tax rates (and tax laws) by the government have the substantive effect of actual enactment, which may follow the announcement by a period of several months. In these circumstances, tax assets and liabilities are measured using the announced tax rate (and tax laws). 49 When different tax rates apply to different levels of taxable income, deferred tax assets and liabilities are measured using the average rates that are expected to apply to the taxable profit (tax loss) of the periods in w .....

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of: (a) the tax rate applicable when the entity recovers (settles) the carrying amount of the asset (liability); and (b) the tax base of the asset (liability). In such cases, an entity measures deferred tax liabilities and deferred tax assets using the tax rate and the tax base that are consistent with the expected manner of recovery or settlement. Example A An item of property, plant and equipment has a carrying amount of ₹ 100 and a tax base of ₹ 60. A tax rate of 20% would apply .....

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ent is made for tax purposes. Cumulative depreciation for tax purposes is ₹ 30 and the tax rate is 30%. If the item is sold for more than cost, the cumulative tax depreciation of ₹ 30 will be included in taxable income but sale proceeds in excess of cost will not be taxable. The tax base of the item is ₹ 70 and there is a taxable temporary difference of ₹ 80. If the entity expects to recover the carrying amount by using the item, it must generate taxable income of ₹ .....

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ccordance with paragraph 61A, the additional deferred tax that arises on the revaluation is recognised in other comprehensive income) Example C The facts are as in example B, except that if the item is sold for more than cost, the cumulative tax depreciation will be included in taxable income (taxed at 30%) and the sale proceeds will be taxed at 40%, after deducting an inflation adjusted cost of ₹ 110. If the entity expects to recover the carrying amount by using the item, it must generate .....

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In addition, the cumulative tax depreciation of ₹ 30 will be included in taxable income and taxed at 30%. On this basis, the tax base is ₹ 80 (Rs. 110 less Rs..30), there is a taxable temporary difference of ₹ 70 and there is a deferred tax liability of ₹ 25 (Rs. 40 at 40% plus ₹ 30 at 30%). If the tax base is not immediately apparent in this example, it may be helpful to consider the fundamental principle set out in paragraph 10. (note: in accordance with paragraph .....

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t. Accordingly, if the tax law specifies a tax rate applicable to the taxable amount derived from the sale of an asset that differs from the tax rate applicable to the taxable amount derived from using an asset, the former rate is applied in measuring the deferred tax liability or asset related to a non-depreciable asset. 51C - 51D (Refer Appendix 1) 51E Paragraph 51B does not change the requirements to apply the principles in paragraphs 24-33 (deductible temporary differences) and paragraphs 34 .....

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circumstances, current and deferred tax assets and liabilities are measured at the tax rate applicable to undistributed profits. 52B In the circumstances described in paragraph 52A, the income tax consequences of dividends are recognised when a liability to pay the dividend is recognised. The income tax consequences of dividends are more directly linked to past transactions or events than to distributions to owners. Therefore, the income tax consequences of dividends are recognised in profit or .....

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n distributed profits is 35%. At the end of the reporting period, 31 December 20X1, the entity does not recognise a liability for dividends proposed or declared after the reporting period. As a result, no dividends are recognised in the year 20X1. Taxable income for 20X1 is Rs.. 100,000. The net taxable temporary difference for the year 20X1 is ₹ 40,000. The entity recognises a current tax liability and a current income tax expense of ₹ 50,000. No asset is recognised for the amount p .....

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ntity recognises the recovery of of ₹ 1,500 (15% of the dividends recognised as a liability) as a current tax asset and as a reduction of current income tax expense for 20X2. 53 Deferred tax assets and liabilities shall not be discounted. 54 The reliable determination of deferred tax assets and liabilities on a discounted basis requires detailed scheduling of the timing of the reversal of each temporary difference. In many cases such scheduling is impracticable or highly complex. Therefore .....

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ned on a discounted basis, for example in the case of retirement benefit obligations (see Ind AS 19, Employee Benefits). 56 The carrying amount of a deferred tax asset shall be reviewed at the end of each reporting period. An entity shall reduce the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilised. Any such reduction shall be reversed t .....

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extent that the tax arises from: (a) a transaction or event which is recognised, in the same or a different period, outside profit or loss, either in other comprehensive income or directly in equity (see paragraphs 61A -65); or (b) a business combination (other than the acquisition by an investment entity, as defined in Ind AS 110, Consolidated Financial Statements, of a subsidiary that is required to be measured at fair value through profit or loss) (see paragraphs 66 -68). 59 Most deferred ta .....

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ded in taxable profit (tax loss) on a cash basis; and] (b) costs of intangible assets have been capitalised in accordance with Ind AS 38 and are being amortised in profit or loss, but were deducted for tax purposes when they were incurred. 60 The carrying amount of deferred tax assets and liabilities may change even though there is no change in the amount of the related temporary differences. This can result, for example, from: (a) a change in tax rates or tax laws; (b) a reassessment of the rec .....

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profit or loss. Therefore, current tax and deferred tax that relates to items that are recognised, in the same or a different period: (a) in other comprehensive income, shall be recognised in other comprehensive income (see paragraph 62). (b) directly in equity, shall be recognised directly in equity (see paragraph 62A). 62 Indian Accounting Standards require or permit particular items to be recognised in other comprehensive income. Examples of such items are: (a) a change in carrying amount ar .....

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y that is applied retrospectively or the correction of an error (see Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors); and (b) amounts arising on initial recognition of the equity component of a compound financial instrument (see paragraph 23). 63 In exceptional circumstances it may be difficult to determine the amount of current and deferred tax that relates to items recognised outside profit or loss (either in other comprehensive income or directly in equity). This ma .....

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, and the deferred tax asset relates (in whole or in part) to an item that was previously recognised outside profit or loss. In such cases, the current and deferred tax related to items that are recognised outside profit or loss are based on a reasonable pro rata allocation of the current and deferred tax of the entity in the tax jurisdiction concerned, or other method that achieves a more appropriate allocation in the circumstances. 64 Ind AS 16 does not specify whether an entity should transfe .....

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o an accounting revaluation of an earlier period, or to one that is expected to be carried out in a future period, the tax effects of both the asset revaluation and the adjustment of the tax base are recognised in other comprehensive income in the periods in which they occur. However, if the revaluation for tax purposes is not related to an accounting revaluation of an earlier period, or to one that is expected to be carried out in a future period, the tax effects of the adjustment of the tax ba .....

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a business combination. In accordance with Ind AS 103, an entity recognises any resulting deferred tax assets (to the extent that they meet the recognition criteria in paragraph 24) or deferred tax liabilities as identifiable assets and liabilities at the acquisition date. Consequently, those deferred tax assets and deferred tax liabilities affect the amount of goodwill or the bargain purchase gain the entity recognises. However, in accordance with paragraph 15(a), an entity does not recognise d .....

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vely, as a result of the business combination it might no longer be probable that future taxable profit will allow the deferred tax asset to be recovered. In such cases, the acquirer recognises a change in the deferred tax asset in the period of the business combination, but does not include it as part of the accounting for the business combination. Therefore, the acquirer does not take it into account in measuring the goodwill or bargain purchase gain it recognises in the business combination. .....

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nces that existed at the acquisition date shall be applied to reduce the carrying amount of any goodwill related to that acquisition. If the carrying amount of that goodwill is zero, any remaining deferred tax benefits shall be recognised in other comprehensive income and accumulated in equity as capital reserve or recognised directly in capital reserve, depending on whether paragraph 34 or paragraph 36A of Ind AS 103, would have applied had the measurement period adjustments been known on the d .....

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tax deduction may differ from the related cumulative remuneration expense, and may arise in a later accounting period. For example, in some jurisdictions, an entity may recognise an expense for the consumption of employee services received as consideration for share options granted, in accordance with Ind AS 102, Share-based Payment, and not receive a tax deduction until the share options are exercised, with the measurement of the tax deduction based on the entity s share price at the date of e .....

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mated, based on information available at the end of the period. For example, if the amount permitted as a deduction in future periods under taxation laws is dependent upon the entity s share price at a future date, the measurement of the deductible temporary difference should be based on the entity s share price at the end of the period. 68C As noted in paragraph 68A, the amount of the tax deduction (or estimated future tax deduction, measured in accordance with paragraph 68B) may differ from th .....

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hrough profit or loss). If the amount of the tax deduction (or estimated future tax deduction) exceeds the amount of the related cumulative remuneration expense, this indicates that the tax deduction relates not only to remuneration expense but also to an equity item. In this situation, the excess of the associated current or deferred tax should be recognised directly in equity. Presentation Tax assets and tax liabilities 69-70 [Refer Appendix 1] Offset 71 An entity shall offset current tax asse .....

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rceable right to set off a current tax asset against a current tax liability when they relate to levied by the same taxation authority and the taxation laws permit the entity to make or receive a single net payment. 73 In consolidated financial statements, a current tax asset of one entity in a group is offset against a current tax liability of another entity in the group if, and only if, the entities concerned have a legally enforceable right to make or receive a single net payment and the enti .....

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ties which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. 75 To avoid the need for detailed scheduling of the timing of the reversal of each temporary difference, this Standard requires an entity to set off a deferred tax asset against a deferred tax liability of the same t .....

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lt in increased tax payments in the same period in which a deferred tax asset of another taxable entity will result in decreased payments by that second taxable entity. Tax expense Tax expense (income) related to profit or loss from ordinary activities 77 The tax expense (income) related to profit or loss from ordinary activities shall be presented as part of profit or loss in the statement of profit and loss. 77A [Refer Appendix 1] Exchange differences on deferred foreign tax liabilities or ass .....

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The major components of tax expense (income) shall be disclosed separately. 80 Components of tax expense (income) may include: (a) current tax expense (income); (b) any adjustments recognised in the period for current tax of prior periods; (c) the amount of deferred tax expense (income) relating to the origination and reversal of temporary differences; (d) the amount of deferred tax expense (income) relating to changes in tax rates or the imposition of new taxes; (e) the amount of the benefit a .....

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come) relating to those changes in accounting policies and errors that are included in profit or loss in accordance with Ind AS 8, because they cannot be accounted for retrospectively. 81 The following shall also be disclosed separately: (a) the aggregate current and deferred tax relating to items that are charged or credited directly to equity (see paragraph 62A); (ab) the amount of income tax relating to each component of other comprehensive income (see paragraph 62 and Ind AS 1); (b) [Refer A .....

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h the applicable tax rate is computed; (d) an explanation of changes in the applicable tax rate(s) compared to the previous accounting period; (e) the amount (and expiry date, if any) of deductible temporary differences, unused tax losses, and unused tax credits for which no deferred tax asset is recognised in the balance sheet; (f) the aggregate amount of temporary differences associated with investments in subsidiaries, branches and associates and interests in joint arrangements, for which def .....

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discontinued operations, the tax expense relating to: (i) the gain or loss on discontinuance; and (ii) the profit or loss from the ordinary activities of the discontinued operation for the period, together with the corresponding amounts for each prior period presented; (i) the amount of income tax consequences of dividends to shareholders of the entity that were proposed or declared before the financial statements were approved for issue, but are not recognised as a liability in the financial s .....

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2 An entity shall disclose the amount of a deferred tax asset and the nature of the evidence supporting its recognition, when: (a) the utilisation of the deferred tax asset is dependent on future taxable profits in excess of the profits arising from the reversal of existing taxable temporary differences; and (b) the entity has suffered a loss in either the current or preceding period in the tax jurisdiction to which the deferred tax asset relates. 82A In the circumstances described in paragraph .....

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ip between tax expense (income) and accounting profit is unusual and to understand the significant factors that could affect that relationship in the future. The relationship between tax expense (income) and accounting profit may be affected by such factors as revenue that is exempt from taxation, expenses that are not deductible in determining taxable profit (tax loss), the effect of tax losses and the effect of foreign tax rates. 85 In explaining the relationship between tax expense (income) a .....

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be more meaningful to aggregate separate reconciliations prepared using the domestic rate in each individual jurisdiction. The following example illustrates how the selection of the applicable tax rate affects the presentation of the numerical reconciliation. Example illustrating paragraph 85 In 19X2, an entity has accounting profit in its own jurisdiction (country A) of ₹ 1,500 (19X1: ₹ 2,000) and in country B of ₹ 1,500 (19X1: ₹ 500). The tax rate is 30% in country A an .....

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e accounting profit. 87 It would often be impracticable to compute the amount of unrecognised deferred tax liabilities arising from investments in subsidiaries, branches and associates and interests in joint arrangements (see paragraph 39). Therefore, this Standard requires an entity to disclose the aggregate amount of the underlying temporary differences but does not require disclosure of the deferred tax liabilities. Nevertheless, where practicable, entities are encouraged to disclose the amou .....

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compute the total amount of the potential income tax consequences that would result from the payment of dividends to shareholders. This may be the case, for example, where an entity has a large number of foreign subsidiaries. However, even in such circumstances, some portions of the total amount may be easily determinable. For example, in a consolidated group, a parent and some of its subsidiaries may have paid at a higher rate on undistributed profits and be aware of the amount that would be re .....

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y also be required to provide disclosures related to temporary differences associated with investments in subsidiaries, branches and associates or interests in joint arrangements. In such cases, an entity considers this in determining the information to be disclosed under paragraph 82A. For example, an entity may be required to disclose the aggregate amount of temporary differences associated with investments in subsidiaries for which no deferred tax liabilities have been recognised (see paragra .....

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lved disputes with the taxation authorities. Similarly, where changes in tax rates or tax laws are enacted or announced after the reporting period, an entity discloses any significant effect of those changes on its current and deferred tax assets and liabilities (see Ind AS 10, Events after the Reporting Period). 7[Effective Date 89 * 90 * 91 * 92 * 93 * 94 * 95 * 96 * 97 * 98 * 98A * 98B * 98C * 98D * 98E As a consequence of issuance of Ind AS 115, Revenue from Contracts with Customers, paragra .....

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ng Estimates and Errors. However, on initial application of the amendment, the change in the opening equity of the earliest comparative period may be recognised in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. If an entity applies this relief, it shall disclose that fact.] Appendix A -Changes in the Tax Status of an Entity or its Shareholders This Appendix is an integr .....

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tax incentives or become subject to a different rate of tax in the future. 2 A change in the tax status of an entity or its shareholders may have an immediate effect on the entity s current tax liabilities or assets. The change may also increase or decrease the deferred tax liabilities and assets recognised by the entity, depending on the effect the change in tax status has on the tax consequences that will arise from recovering or settling the carrying amount of the entity s assets and liabili .....

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, in the same or a different period, in a direct credit or charge to the recognised amount of equity or in amounts recognised in other comprehensive income. Those tax consequences that relate to changes in the recognised amount of equity, in the same or a different period (not included in profit or loss), shall be charged or credited directly to equity. Those tax consequences that relate to amounts recognised in other comprehensive income shall be recognised in other comprehensive income. Append .....

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e Indian Accounting Standard. The purpose of this Appendix is only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 12 and the corresponding International Accounting Standard (IAS) 12, , and SIC 25, -Changes in the Tax Status of an Entity or its Shareholders, issued by the International Accounting Standards Board. Comparison with IAS 12, and SIC 25 1 The transitional provisions given in SIC 25 have not been given in Ind AS 12, since all transitional provisi .....

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nstead of authorised for issue in the context of financial statements considered for the purpose of events after the reporting period. 3 Requirements regarding presentation of tax expense (income) in the separate income statement, where separate income statement is presented, have been deleted. This change is consequential to the removal of option regarding the two statement approach in Ind AS 1. Ind AS 1 requires that the components of profit or loss and components of other comprehensive income .....

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AS 40, paragraphs 51C- 51D have been deleted and the following paragraphs have been modified in Ind AS 12: (i) paragraph 20 (ii) paragraph 51E 6 Paragraph 68(a) has been modified as a consequence of different accounting treatment of bargain purchase gain in Ind AS 103, Business Combinations, in comparison to IFRS 3, Business Combination. 7 Paragraph 33 of Ind AS 12 has been modified due to not allowing the option of deducting specified grant from the cost of the related asset as in Ind AS 20. 8 .....

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ofit in accordance with Ind AS 115, Revenue from Contracts with Customers, or Ind AS 109, Financial Instruments, as relevant, but is included in taxable profit (tax loss) on a cash basis; and" 2. Inserted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018 3. Inserted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018 4. Substituted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018, b .....

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