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For Chartered AccountantsRates reviewed September 2026

Deferred Tax Asset & Liability Calculator

A deferred tax calculator converts the gap between book profit and taxable profit into the deferred tax asset (DTA) or deferred tax liability (DTL) that has to sit on the balance sheet. The gap arises because accounting standards and the Income-tax Act recognise the same income or expense in different years: depreciation, provisions for gratuity and leave encashment, expenditure allowed only on payment, and carried-forward losses are the usual culprits.

Two frameworks operate in India. Entities on Indian GAAP follow AS 22, Accounting for Taxes on Income, which works on the income statement approach and measures timing differences, that is, differences that originate in one year and reverse in later years. Entities on Ind AS follow Ind AS 12, Income Taxes, which works on the balance sheet approach and measures temporary differences, the difference between the carrying amount of an asset or liability and its tax base. The two usually give the same answer for depreciation, but they diverge on revaluations, business combinations and items routed through other comprehensive income, which Ind AS 12 captures and AS 22 does not.

From tax year 2026-27 the computation feeding the tax base comes from the Income-tax Act, 2025. Depreciation now sits in section 33 (section 32 of the 1961 Act) and unabsorbed depreciation in section 33(11) (section 32(2)), while business loss carry-forward is in section 112 (section 72). The rate you apply is the rate you expect to be in force when the difference reverses, so a company that has opted for the 22 per cent concessional regime in section 200 (section 115BAA) measures deferred tax at that rate, not at 30 per cent.

DTA / DTL Calculator

Net profit before tax from the statement of profit and loss.

₹

Schedule II charge for the year.

₹

Block depreciation under the Income-tax Act, 2025 (section 32 of the 1961 Act).

₹

Positive for deductible differences such as a gratuity provision (DTA). Negative for taxable differences (DTL).

₹

Section 33(11) or section 112. A deferred tax asset on these needs virtual certainty under AS 22.

₹

The rate expected to apply when the difference reverses, grossed up for surcharge and cess.

Net deferred tax liability

₹75,504

at 25.168%

Depreciation timing differencetaxable, creates a DTL
₹6,00,000
Other temporary differencesdeductible, creates a DTA
₹3,00,000
Unabsorbed depreciation and carried-forward lossnil
₹0
Net timing differencetaxable, creates a DTL
₹3,00,000
Deferred tax liability at 25.168%
₹1,51,008
Deferred tax asset at 25.168%
₹75,504
Net deferred taxliability
₹75,504
Taxable profit, indicativebook profit ₹50,00,000 adjusted for the differences above
₹47,00,000
Applicable tax rate
25.168%
  • Deferred tax assets and liabilities are never discounted to present value under either AS 22 or Ind AS 12.
  • A deferred tax asset needs reasonable certainty of sufficient future taxable income under AS 22, or the probable test under Ind AS 12.
  • Offset the asset against the liability only where both relate to the same taxable entity and the same tax authority.

The formula

Deferred Tax = (Book Base − Tax Base) × Applicable Tax Rate (including surcharge and cess)

Book Base
Carrying amount of the asset or liability in the financial statements, or book profit for the AS 22 income statement approach.
Tax Base
Written down value or amount attributed to the same item under the Income-tax Act, 2025, for example the tax WDV of a block of assets under section 33.
Applicable Tax Rate
The enacted or substantively enacted rate expected to apply when the difference reverses, grossed up for surcharge and the 4 per cent health and education cess.
DTL
Arises where tax base is lower than book base, that is, the deduction has already been taken for tax and tax will be higher in future years.
DTA
Arises where tax base is higher than book base, that is, the deduction is still to come and future tax will be lower.

Deferred tax assets and liabilities are never discounted to present value under either AS 22 or Ind AS 12.

How to calculate it

  1. 1

    Decide which framework applies

    Companies required to follow Ind AS apply Ind AS 12 and the balance sheet approach. Other companies and non-corporate entities on Indian GAAP apply AS 22 and the timing difference approach. Fix this first, because the list of items you pick up differs.

  2. 2

    Build the difference schedule

    For every asset and liability, set the carrying amount against the tax base. The largest item is almost always the fixed asset block: book WDV under Schedule II of the Companies Act, 2013 against tax WDV under section 33 of the Income-tax Act, 2025. Add provisions, section 43B type items allowed only on payment, and carried-forward losses.

  3. 3

    Classify each difference

    Mark each as taxable (gives a DTL) or deductible (gives a DTA). Permanent differences, such as expenditure that is never allowable or income that is permanently exempt, are excluded entirely. They affect the effective tax rate, not deferred tax.

  4. 4

    Apply the right tax rate

    Use the rate expected when the item reverses, grossed up for surcharge and cess. A domestic company under section 200 (115BAA) works at 22 per cent plus 10 per cent surcharge plus 4 per cent cess, an effective 25.168 per cent. A company still on the default regime uses 30 per cent plus its applicable surcharge and cess.

  5. 5

    Test the DTA for recognition

    AS 22 allows a DTA only where there is reasonable certainty of sufficient future taxable income, and raises the bar to virtual certainty supported by convincing evidence where the DTA arises from unabsorbed depreciation or carried-forward losses. Ind AS 12 uses a single probable test but requires convincing other evidence where there is a history of recent losses. Business plans and forecasts on their own do not establish virtual certainty.

  6. 6

    Net off and disclose

    Offset DTA against DTL only where they relate to the same taxable entity and the same governing tax authority, present the net figure as a non-current item, and disclose the components and the reconciliation between the expected and actual tax expense.

Common differences and the deferred tax they create

Common differences and the deferred tax they create
ItemNature of differenceDeferred tax created
Tax depreciation under section 33 exceeds Schedule II depreciationTaxableDTL
Provision for gratuity or leave encashment not yet paidDeductibleDTA
Statutory dues and similar items allowed only on actual paymentDeductibleDTA
Unabsorbed depreciation carried forward under section 33(11)DeductibleDTA, only on virtual certainty under AS 22
Business loss carried forward under section 112DeductibleDTA, only on virtual certainty under AS 22
Expenditure permanently disallowed, or permanently exempt incomePermanentNone

Worked example

Book WDV of fixed asset block
₹20,00,000
Tax WDV of the same block under section 33
₹14,00,000
Provision for gratuity not yet paid
₹3,00,000
Applicable rate, company under section 200 (115BAA)
25.168% (22% + 10% surcharge + 4% cess)
  • Taxable temporary difference on the block = ₹20,00,000 − ₹14,00,000 = ₹6,00,000
  • DTL on the block = ₹6,00,000 × 25.168% = ₹1,51,008
  • Deductible temporary difference on gratuity provision = ₹3,00,000
  • DTA on the provision = ₹3,00,000 × 25.168% = ₹75,504
  • Net position = ₹1,51,008 − ₹75,504 = ₹75,504

Net deferred tax liability = ₹75,504

Frequently asked questions

A deferred tax asset is the tax effect of a deductible difference: an expense already charged in the books but not yet allowed under the Income-tax Act, or a loss carried forward. It represents tax the entity expects to save in future years. Under AS 22 it can be carried only if there is reasonable certainty of sufficient future taxable income, and virtual certainty where it arises from unabsorbed depreciation or carried-forward losses.
A DTL arises when the tax base of an asset is lower than its carrying amount, typically because tax depreciation has run ahead of book depreciation, so more tax will be paid in later years. A DTA is the mirror image: the deduction is still to come, so less tax will be paid later. Both are measured at the rate expected to apply when the difference reverses.
Virtual certainty is the higher recognition threshold AS 22 imposes before a deferred tax asset arising from unabsorbed depreciation or carried-forward losses can be recognised. It means certainty that for all practical purposes can be treated as certain, and it must be supported by convincing evidence. Projections, budgets and business plans alone do not satisfy it; a signed order book or a binding contract might.
AS 22 uses the income statement approach and measures timing differences between accounting income and taxable income. Ind AS 12 uses the balance sheet approach and measures temporary differences between carrying amounts and tax bases. Ind AS 12 therefore also picks up revaluations, fair value adjustments on business combinations and items recognised in other comprehensive income, which AS 22 does not.
Use the rate enacted or substantively enacted at the reporting date that is expected to apply when the difference reverses, grossed up for surcharge and the 4 per cent health and education cess. A company that has opted for the concessional regime in section 200 of the Income-tax Act, 2025 (section 115BAA of the 1961 Act) uses 25.168 per cent. If the entity changes regime, the whole deferred tax balance is remeasured and the effect goes through the profit and loss account.
No. The accounting standards are unchanged, and the arithmetic of deferred tax is unchanged. What changed from 1 April 2026 is the statutory reference for the tax base: depreciation is now section 33 instead of section 32, unabsorbed depreciation is section 33(11) instead of section 32(2), and business loss carry-forward is section 112 instead of section 72. Update the section references in your notes to accounts and working papers.
Deferred tax is computed using the normal tax rate, not the minimum tax rate, because the minimum tax is a floor rather than the rate at which differences will reverse. Under the Finance Act, 2026, minimum alternate tax under section 206 is a final tax for companies that stay outside the concessional regime, with no fresh credit generated from 1 April 2026, so there is no MAT credit asset to recognise for those years.

Sources

Rates and rules on this page come from the following. This is a working aid, not professional advice: confirm anything material with your Chartered Accountant before you act on it.

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