Key Concepts in Ind AS 12 1. Current Tax: • The amount of income taxes payable (or recoverable) in respect of taxable profit (or tax loss) for a period. • Calculated using tax rates and laws enacted or substantively enacted by the reporting date. • Recognized as a liability (if unpaid) or an asset (if overpaid). 2. Deferred Tax: • Arises due to temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. • Tax base is the amount attributed to an asset or liability for tax purposes. • Temporary differences can be: • Taxable temporary differences: Result in deferred tax liabilities (DTL) as they lead to higher taxable profits in the future. • Deductible temporary differences: Result in deferred tax assets (DTA) as they lead to lower taxable profits in the future. 3. Recognition of Deferred Tax: • Deferred Tax Liabilities (DTL): Recognized for all taxable temporary differences, except in specific cases (e.g., initial recognition of goodwill or certain non-business combination transactions that do not affect accounting or taxable profit). • Deferred Tax Assets (DTA): Recognized for deductible temporary differences, unused tax losses, and tax credits, but only to the extent that it is probable that sufficient taxable profits will be available to utilize them. 4. Measurement: • Deferred tax is measured using the tax rates expected to apply when the temporary differences reverse, based on laws enacted or substantively enacted by the reporting date. • Deferred tax assets and liabilities are not discounted. 5. Presentation: • Current and deferred tax assets/liabilities are classified as non-current in the balance sheet. • Offset of current tax assets and liabilities is allowed only if there is a legally enforceable right and intention to settle on a net basis. • Deferred tax assets and liabilities can be offset if they relate to taxes levied by the same tax authority and the entity has a legally enforceable right. 6. Disclosure: • Disclose major components of tax expense (current and deferred tax). • Provide a reconciliation between accounting profit and tax expense. • Disclose the nature and amount of temporary differences, unused tax losses, and tax carryforwards. Key Principles of Ind AS 12 • Balance Sheet Approach: Focuses on temporary differences between the carrying amount and tax base of assets and liabilities, unlike AS 22, which used the income statement approach (timing differences). • Recognition in Line with Transactions: Tax consequences are recognized in the same component of financial statements (profit or loss, OCI, or equity) as the underlying transaction or event. • Prudence in Deferred Tax Assets: DTA is recognized only when it is probable that taxable profits will be available.