Deferred Tax Made Simple | Which Tax Rate to Use? (Ind AS 12 Explained) | CA Final Live Class

Deferred tax is calculated using: The tax rate that is known at the reporting date (31 March) Any future change after that date is ignored. Assume we purchased a machine for ₹1,00,000 Life = 5 years, SLM Depreciation = ₹20,000 per year After 1 year: WDV = ₹80,000 Now suppose: Profit before depreciation = ₹84,000 Accounting vs Tax Accounting depreciation = ₹20,000 Profit after depreciation = ₹64,000 As per Income Tax: Depreciation = ₹36,000 Taxable income = ₹48,000 Tax Rates Current year tax rate (FY 25–26) = 25% Future tax rate (FY 26–27) = 30% What is future tax rate? The rate applicable on next year’s income. Core Logic As on 31 March 2026: Profit can be calculated Tax depreciation is known Current tax rate is already known (from Budget) Future tax rate should also ideally be known before March The Twist If the new tax rate is NOT announced before March: You cannot use a rate that comes later. If Budget comes in April/May: That new rate cannot be used for this year’s calculation So what do we do? Use the current tax rate (25%) as the future tax rate. Once this clicks, Deferred Tax becomes logic — not a formula. 📩 DM “SAGC” to learn like this 📞 #CAFinal #FinancialReporting #IndAS12 #DeferredTax #ConceptClarity #CAStudents #AccountingLogic #StudySmart #SAGC