Deferred Tax Liability
Deferred tax liabilities stemming from temporary differences—when an liability is recorded on the balance sheet but its tax impact occurs later. This arises due to differences between financial statements prepared in accordance with the rules of the Companies Act and taxable profit based on provision of the Income Tax Act. When company’s book profit is higher than the taxable profit it will pay less tax now and pay more tax in future creating Deferred Tax Liability.
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