Ind AS 12 Income explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Ind AS 12 prescribes the accounting for income taxes, covering both current tax and deferred tax. It uses the balance sheet liability method, recognising deferred tax on temporary differences between the carrying amounts of assets and liabilities and their tax bases.
Overview
Ind AS 12, notified under the Companies (Indian Accounting Standards) Rules, 2015, addresses the current and future tax consequences of transactions and events. Its defining feature is the balance sheet (temporary difference) approach, which is broader than the timing-difference method of erstwhile AS 22 and captures differences that never appear in the statement of profit and loss.
Current Tax
Current tax is the amount payable (or recoverable) on the taxable profit for the period, measured using tax rates enacted or substantively enacted by the reporting date. Unpaid current tax is a liability; excess paid is an asset. Current tax relating to items recognised in OCI or equity is itself recognised in OCI or equity.
Deferred Tax — Temporary Differences
The tax base of an asset or liability is its amount for tax purposes. A temporary difference is the gap between carrying amount and tax base. Taxable temporary differences (e.g. accelerated tax depreciation) produce deferred tax liabilities. Deductible temporary differences (e.g. provisions disallowed until paid, carried-forward losses) produce deferred tax assets. Deferred tax assets are recognised only to the extent it is probable that future taxable profit will be available to absorb them.
Measurement
Deferred tax is measured at the tax rates expected to apply in the period of realisation/settlement, using enacted or substantively enacted rates. It is not discounted. Deferred tax follows its source: recognised in profit or loss, OCI or equity depending on where the related item was recognised.
MAT Credit
Under Ind AS 12, Minimum Alternate Tax (MAT) credit eligible for carry-forward is a deferred tax asset. It is recognised when it is probable the entity will pay tax at normal rates in future and utilise the credit within the carry-forward period permitted under the income-tax law.
Worked Example
A machine has a carrying amount of ₹50,00,000 and a tax written-down value (tax base) of ₹35,00,000 because tax depreciation is faster. The taxable temporary difference is ₹15,00,000. At an expected tax rate of 25%, the deferred tax liability is ₹15,00,000 × 25% = ₹3,75,000. Separately, the entity has a provision for warranties of ₹8,00,000 disallowed for tax until paid; this deductible temporary difference generates a deferred tax asset of ₹8,00,000 × 25% = ₹2,00,000, recognised because sufficient future taxable profit is probable. The net deferred tax liability is ₹1,75,000.
Presentation and Disclosure
Deferred tax assets and liabilities are presented as non-current and offset only when the entity has a legally enforceable right to set off current tax and they relate to the same taxation authority. Disclosures include a reconciliation between the tax expense and accounting profit at the applicable rate, and the components of deferred tax.
Key Differences from AS 22
Ind AS 12 replaces the income-statement timing-difference method with the balance-sheet temporary-difference method, recognises deferred tax on more items (including on consolidation and fair value adjustments), and formally treats MAT credit as a deferred tax asset.