IndAS12 Income Taxes

INDIAN ACCOUNTING STANDARD 12
INCOME TAXES
CONTENTS
from paragraph
OBJECTIVE
SCOPE 1
DEFINITIONS 5
Tax base 7
RECOGNITION OF CURRENT TAX LIABILITIES AND
CURRENT TAX ASSETS 12
RECOGNITION OF DEFERRED TAX LIABILITIES AND
DEFERRED TAX ASSETS 15
Taxable temporary differences 15
Deductible temporary differences 24
Unused tax losses and unused tax credits 34
Reassessment of unrecognised deferred tax assets 37
Investments in subsidiaries, branches and associates
and interests in joint arrangements 38
MEASUREMENT 46
RECOGNITION OF CURRENT AND DEFERRED TAX 57
Items recognised in profit or loss 58
Items recognised outside profit or loss 61
Deferred tax arising from a business combination 66
Current and deferred tax arising from share-based 68A
payment transactions
PRESENTATION 69
Tax assets and tax liabilities 69
Tax expense 77
DISCLOSURE 79
EFFECTIVE DATE 89
APPENDICES
Appendix A- Income Taxes—Changes in the Tax Status
Ind AS 12, Income Taxes
of an Entity or its Shareholders

Appendix B-References to matters contained in other
Indian Accounting Standards
Appendix C, Uncertainty over Income Tax Treatments
Appendix 1- Comparison with IAS 12, Income Taxes,
IFRIC 23 and SIC 25
Indian Accounting Standard (Ind AS) 12
Income Taxes#
(This Indian Accounting Standard includes paragraphs set in bold type and plain
type, which have equal authority. Paragraphs in bold type indicate the main
principles.)
Objective
The objective of this Standard is to prescribe the accounting treatment for
income taxes. The principal issue in accounting for income taxes is how to
account for the current and future tax consequences of:
(a) the future recovery (settlement) of the carrying amount of assets
(liabilities) that are recognised in an entity’s balance sheet; and
(b) transactions and other events of the current period that are recognised
in an entity’s financial statements.
It is inherent in the recognition of an asset or liability that the reporting entity
expects to recover or settle the carrying amount of that asset or liability . If it
is probable that recovery or settlement of that carrying amount will make
future tax payments larger (smaller) than they would be if such recovery or
settlement were to have no tax consequences, this Standard requires an
entity to recognise a deferred tax liability (deferred tax asset), with certain
limited exceptions.
This Standard requires an entity to account for the tax consequences of
transactions and other events in the same way that it accounts for the
transactions and other events themselves. Thus, for transactions and other
events recognised in profit or loss, any related tax effects are also
recognised in profit or loss. For transactions and other events recognised
outside profit or loss (either in other comprehensive income or directly in
equity), any related tax effects are also recognised outside profit or loss
(either in other comprehensive income or directly in equity, respectively).
Similarly, the recognition of deferred tax assets and liabilities in a business
combination affects the amount of goodwill arising in that business
# This Ind AS was notified vide G.S.R. 111(E) dated 16 th February, 2015 and was
amended vide Notification No. G.S.R. 365(E) dated 30 th March, 2016, G.S.R.
310(E) dated 28 th March, 2018, G.S.R. 903(E) dated 20 th September, 2018,
G.S.R. 273(E) dated 30th March, 2019 and G.S.R. 274(E) dated 30th March, 2019.
combination or the amount of the bargain purchase gain recognised.

This Standard also deals with the recognition of deferred tax assets arising
from unused tax losses or unused tax credits, the presentation of in come
taxes in the financial statements and the disclosure of information relating to
income taxes.
Scope
1 This Standard shall be applied in accounting for income taxes.
2 For the purposes of this Standard, income taxes include all domestic
and foreign taxes which are based on taxable profits. Income taxes
also include taxes, such as withholding taxes, which are payable by a
subsidiary, associate or joint arrangement on distributions to the
reporting entity.
3 [Refer Appendix 1]
4 This Standard does not deal with the methods of accounting for
government grants (see Ind AS 20, Accounting for Government Grants
and Disclosure of Government Assistance) or investment tax credits.
However, this Standard does deal with the accounting for temporary
differences that may arise from such grants or investment tax credits.
Definitions
5 The following terms are used in this Standard with the meanings
specified:
Accounting profit is profit or loss for a period before deducting
tax expense.
Taxable profit (tax loss) is the profit (loss) for a period,
determined in accordance with the rules established by the
taxation authorities, upon which income taxes are payable
(recoverable).
Tax expense (tax income) is the aggregate amount included in the
determination of profit or loss for the period in respect of current
tax and deferred tax.
Current tax is the amount of income taxes payable (recoverable)
in respect of the taxable profit (tax loss) for a period.
Deferred tax liabilities are the amounts of income taxes payable in
future periods in respect of taxable temporary differences.

Deferred tax assets are the amounts of income taxes recoverable
in future periods in respect of:
(a) deductible temporary differences;
(b) the carryforward of unused tax losses; and
(c) the carryforward of unused tax credits.
Temporary differences are differences between the carrying
amount of an asset or liability in the balance sheet and its tax
base. Temporary differences may be either:
(a) taxable temporary differences, which are temporary
differences that will result in taxable amounts in
determining taxable profit (tax loss) of future periods when
the carrying amount of the asset or liability is recovered or
settled; or
(b) deductible temporary differences, which are temporary
differences that will result in amounts that are deductible in
determining taxable profit (tax loss) of future periods when
the carrying amount of the asset or liability is recovered or
settled.
The tax base of an asset or liability is the amount attributed to
that asset or liability for tax purposes.
6 Tax expense (tax income) comprises current tax expense (current tax
income) and deferred tax expense (deferred tax income).
Tax base
7 The tax base of an asset is the amount that will be deductible for tax
purposes against any taxable economic benefits that will flow to an
entity when it recovers the carrying amount of the asset. If those
economic benefits will not be taxable, the tax base of the asset is
equal to its carrying amount.
Examples
1 A machine cost Rs. 100. For tax purposes, depreciation of Rs. 30
has already been deducted in the current and prior periods and
the remaining cost will be deductible in future periods, either as
depreciation or through a deduction on disposal. Revenue
generated by using the machine is taxable, any gain on disposal

of the machine will be taxable and any loss on disposal will be
deductible for tax purposes. The tax base of the machine is Rs.
70.
2 Interest receivable has a carrying amount of Rs. 100. The related
interest revenue will be taxed on a cash basis. The tax base of
the interest receivable is nil.
3 Trade receivables have a carrying amount of Rs. 100. The
related revenue has already been included in taxable profit (tax
loss). The tax base of the trade receivables is Rs. 100.
4 Dividends receivable from a subsidiary have a carrying amount of
Rs. 100. The dividends are not taxable. In substance, the entire
carrying amount of the asset is deductible against the economic
benefits. Consequently, the tax base of the dividends receivable
is Rs. 100.(a)
5 A loan receivable has a carrying amount of Rs. 100. The
repayment of the loan will have no tax consequences. The tax
base of the loan is Rs. 100.
(a) Under this analysis, there is no taxable temporary difference. An
alternative analysis is that the accrued dividends receivable have a tax
base of nil and that a tax rate of nil is applied to the resulting taxable
temporary difference of Rs. 100. Under both analyses, there is no
deferred tax liability.
8 The tax base of a liability is its carrying amount, less any amount that
will be deductible for tax purposes in respect of that liability in future
periods. In the case of revenue which is received in advance, the tax
base of the resulting liability is its carrying amount, less any amount of
the revenue that will not be taxable in future periods.
Examples
1 Current liabilities include accrued expenses with a carrying
amount of Rs. 100. The related expense will be deducted for tax
purposes on a cash basis. The tax base of the accrued expenses
is nil.
2 Current liabilities include interest revenue received in advance,
with a carrying amount of Rs. 100. The related interest revenue
was taxed on a cash basis. The tax base of the interest received
in advance is nil.
3 Current liabilities include accrued expenses with a carrying

amount of Rs. 100. The related expense has already been
deducted for tax purposes. The tax base of the accrued
expenses is Rs. 100.
4 Current liabilities include accrued fines and penalties with a
carrying amount of Rs. 100. Fines and penalties are not
deductible for tax purposes. The tax base of the accrued fines
and penalties is Rs. 100.(a)
5 A loan payable has a carrying amount of Rs. 100. The repayment
of the loan will have no tax consequences. The tax base of the
loan is Rs. 100.
(a) Under this analysis, there is no deductible temporary difference. An
alternative analysis is that the accrued fines and penalties payable
have a tax base of nil and that a tax rate of nil is applied to the resulting
deductible temporary difference of Rs. 100. Under both analyses, there
is no deferred tax asset.
9 Some items have a tax base but are not recognised as assets and
liabilities in the balance sheet. For example, preliminary expenses are
recognised as an expense in determining accounting profit in the
period in which they are incurred but may not be permitted as a
deduction in determining taxable profit (tax loss) until a later period (s).
The difference between the tax base of the preliminary expenses,
being the amount permitted as a deduction in future periods under
taxation laws, and the carrying amount of nil is a deductible temporary
difference that results in a deferred tax asset.
10 Where the tax base of an asset or liability is not immediately apparent,
it is helpful to consider the fundamental principle upon which this
Standard is based: that an entity shall, with certain limited exceptions,
recognise a deferred tax liability (asset) whenever recovery or
settlement of the carrying amount of an asset or liability would make
future tax payments larger (smaller) than they would be if such
recovery or settlement were to have no tax consequences. Example C
following paragraph 51A illustrates circumstances when it may be
helpful to consider this fundamental principle, for example, when the
tax base of an asset or liability depends on the expected manner of
recovery or settlement.
11 The tax base is determined by reference to the tax returns of each
entity in the group. In some jurisdictions, in consolidated financial
statements, temporary differences are determined by comparing the

carrying amounts of assets and liabilities in the consolidated financial
statements with the appropriate tax base. The tax base is determined
by reference to a consolidated tax return in those jurisdictions in which
such a return is filed.
Recognition of current tax liabilities and current

tax assets
12 Current tax for current and prior periods shall, to the extent
unpaid, be recognised as a liability. If the amount already paid in
respect of current and prior periods exceeds the amount due for
those periods, the excess shall be recognised as an asset.
13 The benefit relating to a tax loss that can be carried back to
recover current tax of a previous period shall be recognised as an
asset.
14 When a tax loss is used to recover current tax of a previous period, an
entity recognises the benefit as an asset in the period in which the tax
loss occurs because it is probable that the benefit will flow to the entity
and the benefit can be reliably measured.
Recognition of deferred tax liabilities and deferred

tax assets
Taxable temporary differences
15 A deferred tax liability shall be recognised for all taxable
temporary differences, except to the extent that the deferred tax
liability arises from:
(a) the initial recognition of goodwill; or
(b) the initial recognition of an asset or liability in a transaction
which:
(i) is not a business combination; and
(ii) at the time of the transaction, affects neither
accounting profit nor taxable profit (tax loss).
However, for taxable temporary differences associated with
investments in subsidiaries, branches and associates, and
interests in joint arrangements, a deferred tax liability shall be

recognised in accordance with paragraph 39.
16 It is inherent in the recognition of an asset that its carrying amount will
be recovered in the form of economic benefits that flow to the entity in
future periods. When the carrying amount of the asset exceeds its tax
base, the amount of taxable economic benefits will exceed the amount
that will be allowed as a deduction for tax purposes. This difference is
a taxable temporary difference and the obligation to pay the resulting
income taxes in future periods is a deferred tax liability. As the entity
recovers the carrying amount of the asset, the taxable temporary
difference will reverse and the entity will have taxable profit. This
makes it probable that economic benefits will flow from the entity in the
form of tax payments. Therefore, this Standard requires the
recognition of all deferred tax liabilities, except in certain
circumstances described in paragraphs 15 and 39.
Example
An asset which cost Rs. 150 has a carrying amount of Rs. 100.
Cumulative depreciation for tax purposes is Rs. 90 and the tax rate
is 25%.
The tax base of the asset is Rs. 60 (cost of Rs. 150 less cumulative
tax depreciation of Rs. 90). To recover the carrying amount of Rs.
100, the entity must earn taxable income of Rs. 100, but will only
be able to deduct tax depreciation of Rs. 60. Consequently, the
entity will pay income taxes of Rs.10 (Rs. 40 at 25%) when it
recovers the carrying amount of the asset. The difference between
the carrying amount of Rs. 100 and the tax base of Rs. 60 is a
taxable temporary difference of Rs. 40. Therefore, the entity
recognises a deferred tax liability of Rs. 10 (Rs. 40 at 25%)
representing the income taxes that it will pay when it recovers the
carrying amount of the asset.
17 Some temporary differences arise when income or expense is included
in accounting profit in one period but is included in taxable profit in a
different period. Such temporary differences are often described as
timing differences. The following are examples of temporary
differences of this kind which are taxable temporary differences and
which therefore result in deferred tax liabilities:
(a) interest revenue is included in accounting profit on a time
proportion basis but may, in some jurisdictions, be included in

taxable profit when cash is collected. The tax base of any
receivable recognised in the balance sheet with respect to such
revenues is nil because the revenues do not affect taxable profit
until cash is collected;
(b) depreciation used in determining taxable profit (tax loss) may
differ from that used in determining accounting profit. The
temporary difference is the difference between the carrying
amount of the asset and its tax base which is the original cost of
the asset less all deductions in respect of that asset permitted
under taxation laws in determining taxable profit of the current
and prior periods. A taxable temporary difference arises, and
results in a deferred tax liability, when tax depreciation is
accelerated (if tax depreciation is less rapid than accounting
depreciation, a deductible temporary difference arises, and
results in a deferred tax asset); and
(c) development costs may be capitalised and amortised over
future periods in determining accounting profit but deducted in
determining taxable profit in the period in which they are
incurred. Such development costs have a tax base of nil as they
have already been deducted from taxable profit. The temporary
difference is the difference between the carrying amount of the
development costs and their tax base of nil.
18 Temporary differences also arise when:
(a) the identifiable assets acquired and liabilities assumed in a
business combination are recognised at their fair values in
accordance with Ind AS 103, Business Combinations, but no
equivalent adjustment is made for tax purposes (see paragraph
19);
(b) assets are revalued and no equivalent adjustment is made for
tax purposes (see paragraph 20);
(c) goodwill arises in a business combination (see paragraph 21);
(d) the tax base of an asset or liability on initial recognition differs
from its initial carrying amount, for example when an entity
benefits from non-taxable government grants related to assets
(see paragraphs 22 and 33); or
(e) the carrying amount of investments in subsidiaries, branches
and associates or interests in joint arrangements becomes

different from the tax base of the investment or interest (see
paragraphs 38–45).
Business combinations
19 With limited exceptions, the identifiable assets acquired and liabilities
assumed in a business combination are recognised at their fair values
at the acquisition date. Temporary differences arise when the tax
bases of the identifiable assets acquired and liabilities assumed are
not affected by the business combination or are affected differently.
For example, when the carrying amount of an asset is increased to fair
value but the tax base of the asset remains at cost to the previous
owner, a taxable temporary difference arises which results in a
deferred tax liability. The resulting deferred tax liability affects goodwill
(see paragraph 66).
Assets carried at fair value
20 1Ind ASs permit or require certain assets to be carried at fair value or to
be revalued (see, for example, Ind AS 16, Property, Plant and
Equipment, Ind AS 38, Intangible Assets, Ind AS 109, Financial
Instruments and Ind AS 116, Leases). In some jurisdictions, the
revaluation or other restatement of an asset to fair value affects
taxable profit (tax loss) for the current period. As a result, the tax base
of the asset is adjusted and no temporary difference arises. In other
jurisdictions, the revaluation or restatement of an asset does not affect
taxable profit in the period of the revaluation or restatement and,
consequently, the tax base of the asset is not adjusted. Nevertheless,
the future recovery of the carrying amount will result in a taxable flow
of economic benefits to the entity and the amount that will be
deductible for tax purposes will differ from the amount of those
economic benefits. The difference between the carrying amount of a
revalued asset and its tax base is a temporary difference and gives
rise to a deferred tax liability or asset. This is true even if:
(a) the entity does not intend to dispose of the asset. In such cases,
the revalued carrying amount of the asset will be recovered
through use and this will generate taxable income which
exceeds the depreciation that will be allowable for tax purposes
in future periods; or
1 Substituted vide Notification No. G.S.R. 273(E) dated 30 th March, 2019.

(b) tax on capital gains is deferred if the proceeds of the disposal of

the asset are invested in similar assets. In such cases, the tax
will ultimately become payable on sale or use of the similar
assets.
Goodwill
21 Goodwill arising in a business combination is measured as the excess
of (a) over (b) below:
(a) the aggregate of:
(i) the consideration transferred measured in accordance
with Ind AS 103, which generally requires acquisition-
date fair value;
(ii) the amount of any non-controlling interest in the acquiree
recognised in accordance with Ind AS 103; and
(iii) in a business combination achieved in stages, the
acquisition-date fair value of the acquirer’s previously
held equity interest in the acquiree.
(b) the net of the acquisition-date amounts of the identifiable assets
acquired and liabilities assumed measured in accordance with
Ind AS 103.
Many jurisdictions do not allow reductions in the carrying amount of
goodwill as a deductible expense in determining taxable profit.
Moreover, in such jurisdictions, the cost of goodwill is often not
deductible when a subsidiary disposes of its underlying business. In
such jurisdictions, goodwill has a tax base of nil. Any difference
between the carrying amount of goodwill and its tax base of nil is a
taxable temporary difference. However, this Standard does not permit
the recognition of the resulting deferred tax liability because goodwill is
measured as a residual and the recognition of the deferred tax liability
would increase the carrying amount of goodwill.
21A Subsequent reductions in a deferred tax liability that is unrecognised
because it arises from the initial recognition of goodwill are also
regarded as arising from the initial recognition of goodwill and are
therefore not recognised under paragraph 15(a). For example, if in a
business combination an entity recognises goodwill of Rs. 100 that has
a tax base of nil, paragraph 15(a) prohibits the entity from recognising
the resulting deferred tax liability. If the entity subsequently recognises
an impairment loss of Rs. 20 for that goodwill, the amount of the

taxable temporary difference relating to the goodwill is reduced from
Rs. 100 to Rs. 80, with a resulting decrease in the value of the
unrecognised deferred tax liability. That decrease in the value of the
unrecognised deferred tax liability is also regarded as relating to the
initial recognition of the goodwill and is therefore prohibited from being
recognised under paragraph 15(a).
21B Deferred tax liabilities for taxable temporary differences relating to
goodwill are, however, recognised to the extent they do not arise from
the initial recognition of goodwill. For example, if in a business
combination an entity recognises goodwill of Rs. 100 that is deductible
for tax purposes at a rate of 20 per cent per year starting in the year of
acquisition, the tax base of the goodwill is Rs. 100 on initial recognition
and Rs. 80 at the end of the year of acquisition. If the carrying amount
of goodwill at the end of the year of acquisition remains unchanged at
Rs. 100, a taxable temporary difference of Rs. 20 arises at the end of
that year. Because that taxable temporary difference does not relate to
the initial recognition of the goodwill, the resulting deferred tax liability
is recognised.
Initial recognition of an asset or liability
22 A temporary difference may arise on initial recognition of an asset or
liability, for example if part or all of the cost of an asset will not be
deductible for tax purposes. The method of accounting for such a
temporary difference depends on the nature of the transaction that led
to the initial recognition of the asset or liability:
(a) in a business combination, an entity recognises any deferred tax
liability or asset and this affects the amount of goodwill or
bargain purchase gain it recognises (see paragraph 19);
(b) if the transaction affects either accounting profit or taxable
profit, an entity recognises any deferred tax liability or asset and
recognises the resulting deferred tax expense or income in profit
or loss (see paragraph 59);
(c) if the transaction is not a business combination, and affects
neither accounting profit nor taxable profit, an entity would, in
the absence of the exemption provided by paragraphs 15 and
24, recognise the resulting deferred tax liability or asset and
adjust the carrying amount of the asset or liability by the same
amount. Such adjustments would make the financial statements

less transparent. Therefore, this Standard does not permit an
entity to recognise the resulting deferred tax liability or asset,
either on initial recognition or subsequently (see example
below). Furthermore, an entity does not recognise subsequent
changes in the unrecognised deferred tax liability or asset as
the asset is depreciated.
Example illustrating paragraph 22(c)
An entity intends to use an asset which cost Rs. 1,000 throughout
its useful life of five years and then dispose of it for a residual value
of nil. The tax rate is 40%. Depreciation of the asset is not
deductible for tax purposes. On disposal, any capital gain would not
be taxable and any capital loss would not be deductible.
As it recovers the carrying amount of the asset, the entity will earn
taxable income of Rs. 1,000 and pay tax of Rs. 400. The entity does
not recognise the resulting deferred tax liability of Rs. 400 because
it results from the initial recognition of the asset.
In the following year, the carrying amount of the asset is Rs. 800. In
earning taxable income of Rs. 800, the entity will pay tax of Rs. 320.
The entity does not recognise the deferred tax liability of Rs. 320
because it results from the initial recognition of the asset.
23 In accordance with Ind AS 32, Financial Instruments: Presentation, the
issuer of a compound financial instrument (for example, a convertible
bond) classifies the instrument’s liability component as a liability and
the equity component as equity. In some jurisdictions, the tax base of
the liability component on initial recognition is equal to the initial
carrying amount of the sum of the liability and equity components. The
resulting taxable temporary difference arises from the initial
recognition of the equity component separately from the liability
component. Therefore, the exception set out in paragraph 15(b) does
not apply. Consequently, an entity recognises the resulting deferred
tax liability. In accordance with paragraph 61A, the deferred tax is
charged directly to the carrying amount of the equity component. In
accordance with paragraph 58, subsequent changes in the deferred
tax liability are recognised in profit or loss as deferred tax expense
(income).
Deductible temporary differences

24 A deferred tax asset shall be recognised for all deductible
temporary differences to the extent that it is probable that taxable
profit will be available against which the deductible temporary
difference can be utilised, unless the deferred tax asset arises
from the initial recognition of an asset or liability in a transaction
that:
(a) is not a business combination; and
(b) at the time of the transaction, affects neither accounting
profit nor taxable profit (tax loss).
However, for deductible temporary differences associated with
investments in subsidiaries, branches and associates, and
interests in joint arrangements, a deferred tax asset shall be
recognised in accordance with paragraph 44.
25 It is inherent in the recognition of a liability that the carrying amount will
be settled in future periods through an outflow from the entity of
resources embodying economic benefits. When resources flow from
the entity, part or all of their amounts may be deductible in determining
taxable profit of a period later than the period in which the liability is
recognised. In such cases, a temporary difference exists between the
carrying amount of the liability and its tax base. Accordingly, a
deferred tax asset arises in respect of the income taxes that will be
recoverable in the future periods when that part of the liability is
allowed as a deduction in determining taxable profit. Similarly, if the
carrying amount of an asset is less than its tax base, the difference
gives rise to a deferred tax asset in respect of the income taxes that
will be recoverable in future periods.
Example
An entity recognises a liability of Rs. 100 for gratuity and leave
encashment expenses by creating a provision for gratuity and leave
encashment. For tax purposes, any amount with regard to gratuity
and leave encashment will not be deductible until the entity pays the
same. The tax rate is 25%.
The tax base of the liability is nil (carrying amount of Rs. 100, less
the amount that will be deductible for tax purposes in respect of that
liability in future periods). In settling the liability for its carrying
amount, the entity will reduce its future taxable profit by an amount
of Rs. 100 and, consequently, reduce its future tax payments by Rs.
25 (Rs. 100 at 25%). The difference between the carrying amount of
Rs. 100 and the tax base of nil is a deductible temporary difference
of Rs. 100. Therefore, the entity recognises a deferred tax asset of
Rs. 25 (Rs. 100 at 25%), provided that it is probable that the entity
will earn sufficient taxable profit in future periods to benefit from a
reduction in tax payments.
26 The following are examples of deductible temporary differences that
result in deferred tax assets:
(a) retirement benefit costs may be deducted in determining
accounting profit as service is provided by the employee, but
deducted in determining taxable profit either when contributions
are paid to a fund by the entity or when retirement benefits are
paid by the entity. A temporary difference exists between the
carrying amount of the liability and its tax base; the tax base of
the liability is usually nil. Such a deductible temporary difference
results in a deferred tax asset as economic benefits will flow to
the entity in the form of a deduction from taxable profits when
contributions or retirement benefits are paid;
(b) preliminary expenses are recognised as an expense in
determining accounting profit in the period in which they are
incurred but may not be permitted as a deduction in determining
taxable profit (tax loss) until a later period(s). The difference
between the tax base of the preliminary expenses, being the
amount permitted as a deduction in future periods under
taxation laws, and the carrying amount of nil is a deductible
temporary difference that results in a deferred tax asset;
(c) with limited exceptions, an entity recognises the identifiable
assets acquired and liabilities assumed in a business
combination at their fair values at the acquisition date. When a
liability assumed is recognised at the acquisition date but the
related costs are not deducted in determining taxable profits
until a later period, a deductible temporary difference arises
which results in a deferred tax asset. A deferred tax asset also
arises when the fair value of an identifiable asset acquired is
less than its tax base. In both cases, the resulting deferred tax
asset affects goodwill (see paragraph 66); and
(d) certain assets may be carried at fair value, or may be revalued,

without an equivalent adjustment being made for tax purposes
(see paragraph 20). A deductible temporary difference arises if
the tax base of the asset exceeds its carrying amount.
2Example illustrating paragraph 26(d)
Identification of a deductible temporary difference at the end of Year
2:
Entity A purchases for Rs. 1,000, at the beginning of Year 1, a debt
instrument with a nominal value of Rs. 1,000 payable on maturity in 5
years with an interest rate of 2% payable at the end of each year. The
effective interest rate is 2%. The debt instrument is measured at fair
value.
At the end of Year 2, the fair value of the debt instrument has
decreased to Rs. 918 as a result of an increase in market interest
rates to 5%. It is probable that Entity A will collect all the contractual
cash flows if it continues to hold the debt instrument.
Any gains (losses) on the debt instrument are taxable (deductible)
only when realised. The gains (losses) arising on the sale or maturity
of the debt instrument are calculated for tax purposes as the
difference between the amount collected and the original cost of the
debt instrument.
Accordingly, the tax base of the debt instrument is its original cost.
The difference between the carrying amount of the debt instrument in
Entity A’s balance sheet of Rs. 918 and its tax base of Rs. 1,000 gives
rise to a deductible temporary difference of Rs. 82 at the end of Year
2 (see paragraphs 20 and 26(d)), irrespective of whether Entity A
expects to recover the carrying amount of the debt instrument by sale
or by use, i.e. by holding it and collecting contractual cash flows, or a
combination of both.
This is because deductible temporary differences are differences
between the carrying amount of an asset or liability in the balance sheet
and its tax base that will result in amounts that are deductible in
determining taxable profit (tax loss) of future periods, when the carrying
amount of the asset or liability is recovered or settled (see paragraph 5).
2 Inserted vide Notification No. G.S.R. 310(E) dated 28 th March, 2018.

Entity A obtains a deduction equivalent to the tax base of the asset of Rs.
1,000 in determining taxable profit (tax loss) either on sale or on maturity.
27 The reversal of deductible temporary differences results in deductions
in determining taxable profits of future periods. However, economic
benefits in the form of reductions in tax payments will flow to the entity
only if it earns sufficient taxable profits against which the deductions
can be offset. Therefore, an entity recognises deferred tax assets only
when it is probable that taxable profits will be available against which
the deductible temporary differences can be utilised.
27A 3When an entity assesses whether taxable profits will be availabl e
against which it can utilise a deductible temporary difference, it
considers whether tax law restricts the sources of taxable profits
against which it may make deductions on the reversal of that
deductible temporary difference. If tax law imposes no such
restrictions, an entity assesses a deductible temporary difference in
combination with all of its other deductible temporary differences.
However, if tax law restricts the utilisation of losses to deduction
against income of a specific type, a deductible temporary difference is
assessed in combination only with other deductible temporary
differences of the appropriate type.
28 It is probable that taxable profit will be available against which a
deductible temporary difference can be utilised when there are
sufficient taxable temporary differences relating to the same taxation
authority and the same taxable entity which are expected to reverse:
(a) in the same period as the expected reversal of the deductible
temporary difference; or
(b) in periods into which a tax loss arising from the deferred tax
asset can be carried back or forward.
In such circumstances, the deferred tax asset is recognised in the
period in which the deductible temporary differences arise.
29 4When there are insufficient taxable temporary differences relating to
the same taxation authority and the same taxable entity, the deferred
tax asset is recognised to the extent that:
(a) it is probable that the entity will have sufficient taxable profit
relating to the same taxation authority and the same taxable

4 Substituted vide Notification No. G.S.R. 310(E) dated 28th March, 2018.
entity in the same period as the reversal of the deductible

temporary difference (or in the periods into which a tax loss
arising from the deferred tax asset can be carried back or
forward). In evaluating whether it will have sufficient taxable
profit in future periods, an entity:
(i) compares the deductible temporary differences with
future taxable profit that excludes tax deductions resulting
from the reversal of those deductible temporary
differences. This comparison shows the extent to which
the future taxable profit is sufficient for the entity to
deduct the amounts resulting from the reversal of those
deductible temporary differences.
(ii) ignores taxable amounts arising from deductible
temporary differences that are expected to originate in
future periods, because the deferred tax asset arising
from these deductible temporary differences will itself
require future taxable profit in order to be utilised; or
(b) tax planning opportunities are available to the entity that will
create taxable profit in appropriate periods.
29A 5The estimate of probable future taxable profit may include the
recovery of some of an entity’s assets for more than their carrying
amount if there is sufficient evidence that it is probable that the entity
will achieve this. For example, when an asset is measured at fair
value, the entity shall consider whether there is sufficient evidence to
conclude that it is probable that the entity will recover the asset for
more than its carrying amount. This may be the case, for example,
when an entity expects to hold a fixed-rate debt instrument and collect
the contractual cash flows.
30 Tax planning opportunities are actions that the entity would take in
order to create or increase taxable income in a particular period before
the expiry of a tax loss or tax credit carryforward. For example, in
some jurisdictions, taxable profit may be created or increased by:
(a) electing to have interest income taxed on either a received or
receivable basis;
(b) deferring the claim for certain deductions from taxable profit;

(c) selling, and perhaps leasing back, assets that have appreciated
but for which the tax base has not been adjusted to reflect such
appreciation; and
(d) selling an asset that generates non-taxable income (such as, in
some jurisdictions, a government bond) in order to purchase
another investment that generates taxable income.
Where tax planning opportunities advance taxable profit from a later
period to an earlier period, the utilisation of a tax loss or tax credit
carryforward still depends on the existence of future taxable profit from
sources other than future originating temporary differences.
31 When an entity has a history of recent losses, the entity considers the
guidance in paragraphs 35 and 36.
Goodwill
32A If the carrying amount of goodwill arising in a business combination is
less than its tax base, the difference gives rise to a deferred tax asset.
The deferred tax asset arising from the initial recognition of goodwill
shall be recognised as part of the accounting for a business
combination to the extent that it is probable that taxable profit will be
available against which the deductible temporary difference could be
utilised.
Initial recognition of an asset or liability
33 6One case when a deferred tax asset arises on initial recognition of an
asset is when a non-taxable Government grant related to an asset is
deducted in arriving at the carrying amount of the asset but, for tax
purposes, is not deducted from the asset’s depreciable amount (in
other words its tax base); the carrying amount of the asset is less than
its tax base and this gives rise to a deductible temporary difference.
Government grants may also be set up as deferred income in which
case the difference between the deferred income and its tax base of
nil is a deductible temporary difference. Whichever method of
presentation an entity adopts, the entity does not recognise the
resulting deferred tax asset, for the reason given in paragraph 22.
6 Substituted vide Notification No. G.S.R. 903(E) dated 20 th September, 2018.

Unused tax losses and unused tax credits

34 A deferred tax asset shall be recognised for the carryforward of
unused tax losses and unused tax credits to the extent that it is
probable that future taxable profit will be available against which
the unused tax losses and unused tax credits can be utilised.
35 The criteria for recognising deferred tax assets arising from the
carryforward of unused tax losses and tax credits are the same as the
criteria for recognising deferred tax assets arising from deductible
temporary differences. However, the existence of unused tax losses is
strong evidence that future taxable profit may not be available.
Therefore, when an entity has a history of recent losses, the entity
recognises a deferred tax asset arising from unused tax losses or tax
credits only to the extent that the entity has sufficient taxable
temporary differences or there is convincing other evidence that
sufficient taxable profit will be available against which the unused tax
losses or unused tax credits can be utilised by the entity. In such
circumstances, paragraph 82 requires disclosure of the amount of the
deferred tax asset and the nature of the evidence supporting its
recognition.
36 An entity considers the following criteria in assessing the probability
that taxable profit will be available against which the unused tax losses
or unused tax credits can be utilised:
(a) whether the entity has sufficient taxable temporary differences
relating to the same taxation authority and the same taxable
entity, which will result in taxable amounts against which the
unused tax losses or unused tax credits can be utilised before
they expire;
(b) whether it is probable that the entity will have taxable profits
before the unused tax losses or unused tax credits expire;
(c) whether the unused tax losses result from identifiable causes
which are unlikely to recur; and
(d) whether tax planning opportunities (see paragraph 30) are
available to the entity that will create taxable profit in the period
in which the unused tax losses or unused tax credits can be
utilised.
To the extent that it is not probable that taxable profit will be available
against which the unused tax losses or unused tax credits can be
utilised, the deferred tax asset is not recognised.
Reassessment of unrecognised deferred tax assets
37 At the end of each reporting period, an entity reassesses unrecognised
deferred tax assets. The entity recognises a previously unrecognised
deferred tax asset to the extent that it has become probable that future
taxable profit will allow the deferred tax asset to be recovered. For
example, an improvement in trading conditions may make it more
probable that the entity will be able to generate sufficient taxable profit
in the future for the deferred tax asset to meet the recognition criteria
set out in paragraph 24 or 34. Another example is when an entity
reassesses deferred tax assets at the date of a business combination
or subsequently (see paragraphs 67 and 68).
Investments in subsidiaries, branches and
associates and interests in joint arrangements
38 Temporary differences arise when the carrying amount of investments
in subsidiaries, branches and associates or interests in joint
arrangements (namely the parent or investor’s share of the net assets
of the subsidiary, branch, associate or investee, including the carrying
amount of goodwill) becomes different from the tax base (which is
often cost) of the investment or interest. Such differences may arise in
a number of different circumstances, for example:
(a) the existence of undistributed profits of subsidiaries, branches,
associates and joint arrangements;
(b) changes in foreign exchange rates when a parent and its
subsidiary are based in different countries; and
(c) a reduction in the carrying amount of an investment in an
associate to its recoverable amount.
In consolidated financial statements, the temporary difference may be
different from the temporary difference associated with that investment
in the parent’s separate financial statements if the parent carries the
investment in its separate financial statements at cost or revalued
amount.
39 An entity shall recognise a deferred tax liability for all taxable
temporary differences associated with investments in
subsidiaries, branches and associates, and interests in joint
arrangements, except to the extent that both of the following

conditions are satisfied:
(a) the parent, investor, joint venturer or joint operator is able
to control the timing of the reversal of the temporary
difference; and
(b) it is probable that the temporary difference will not reverse
in the foreseeable future.
40 As a parent controls the dividend policy of its subsidiary, it is able to
control the timing of the reversal of temporary differences associated
with that investment (including the temporary differences arising not
only from undistributed profits but also from any foreign exchange
translation differences). Furthermore, it would often be impracticable to
determine the amount of income taxes that would be payable when the
temporary difference reverses. Therefore, when the parent has
determined that those profits will not be distributed in the foreseeable
future the parent does not recognise a deferred tax liability. The same
considerations apply to investments in branches.
41 The non-monetary assets and liabilities of an entity are measured in its
functional currency (see Ind AS 21, The Effects of Changes in Foreign
Exchange Rates). If the entity’s taxable profit or tax loss (and, hence,
the tax base of its non-monetary assets and liabilities) is determined in
a different currency, changes in the exchange rate give rise to
temporary differences that result in a recognised deferred tax liability
or (subject to paragraph 24) asset. The resulting deferred tax is
charged or credited to profit or loss (see paragraph 58).
42 An investor in an associate does not control that entity and is usually
not in a position to determine its dividend policy. Therefore, in the
absence of an agreement requiring that the profits of the associate will
not be distributed in the foreseeable future, an investor recognises a
deferred tax liability arising from taxable temporary differences
associated with its investment in the associate. In some cases, an
investor may not be able to determine the amount of tax that would be
payable if it recovers the cost of its investment in an associate, but can
determine that it will equal or exceed a minimum amount. In such
cases, the deferred tax liability is measured at this amount.
43 The arrangement between the parties to a joint arrangement usually
deals with the distribution of the profits and identifies whether
decisions on such matters require the consent of all the parties or a

group of the parties. When the joint venturer or joint operator can
control the timing of the distribution of its share of the profits of the
joint arrangement and it is probable that its share of the profits will not
be distributed in the foreseeable future, a deferred tax liability is not
recognised.
44 An entity shall recognise a deferred tax asset for all deductible
temporary differences arising from investments in subsidiaries,
branches and associates, and interests in joint arrangements, to
the extent that, and only to the extent that, it is probable that:
(a) the temporary difference will reverse in the foreseeable
future; and
(b) taxable profit will be available against which the temporary
difference can be utilised.
45 In deciding whether a deferred tax asset is recognised for deductible
temporary differences associated with its investments in subsidiaries,
branches and associates, and its interests in joint arrangements, an
entity considers the guidance set out in paragraphs 28 to 31.
Measurement
46 Current tax liabilities (assets) for the current and prior periods
shall be measured at the amount expected to be paid to
(recovered from) the taxation authorities, using the tax rates (and
tax laws) that have been enacted or substantively enacted by the
end of the reporting period.
47 Deferred tax assets and liabilities shall be measured at the tax
rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted by the end
of the reporting period.
48 Current and deferred tax assets and liabilities are usually measured
using the tax rates (and tax laws) that have been enacted. However, in
some jurisdictions, announcements of tax rates (and tax laws) by the
government have the substantive effect of actual enactment, which
may follow the announcement by a period of several months. In these
circumstances, tax assets and liabilities are measured using the
announced tax rate (and tax laws).
49 When different tax rates apply to different levels of taxable income,

deferred tax assets and liabilities are measured using the average
rates that are expected to apply to the taxable profit (tax loss) of the
periods in which the temporary differences are expected to reverse.
51 The measurement of deferred tax liabilities and deferred tax
assets shall reflect the tax consequences that would follow from
the manner in which the entity expects, at the end of the reporting
period, to recover or settle the carrying amount of its assets and
liabilities.
51A In some jurisdictions, the manner in which an entity recovers (settles)
the carrying amount of an asset (liability) may affect either or both of:
(a) the tax rate applicable when the entity recovers (settles) the
carrying amount of the asset (liability); and
(b) the tax base of the asset (liability).
In such cases, an entity measures deferred tax liabilities and deferred
tax assets using the tax rate and the tax base that are consistent with
the expected manner of recovery or settlement.
Example A
An item of property, plant and equipment has a carrying amount of
Rs. 100 and a tax base of Rs. 60. A tax rate of 20% would apply if
the item were sold and a tax rate of 30% would apply to other
income.
The entity recognises a deferred tax liability of Rs. 8 (Rs. 40 at
20%) if it expects to sell the item without further use and a deferred
tax liability of Rs. 12 (Rs. 40 at 30%) if it expects to retain the item
and recover its carrying amount through use.
Example B
An item of property, plant and equipment with a cost of Rs. 100 and
a carrying amount of Rs. 80 is revalued to Rs. 150. No equivalent
adjustment is made for tax purposes. Cumulative depreciation for
tax purposes is Rs. 30 and the tax rate is 30%. If the item is sold for
more than cost, the cumulative tax depreciation of Rs. 30 will be
included in taxable income but sale proceeds in excess of cost will
not be taxable.
The tax base of the item is Rs. 70 and there is a taxable temporary
difference of Rs. 80. If the entity expects to recover the carrying
amount by using the item, it must generate taxable income of Rs.
150, but will only be able to deduct depreciation of Rs. 70. On this
basis, there is a deferred tax liability of Rs. 24 (Rs. 80 at 30%). If
the entity expects to recover the carrying amount by selling the item
immediately for proceeds of Rs. 150, the deferred tax liability is
computed as follows:
Taxable Temporary Tax Deferred Tax
Difference Rate Liability
(Amount in Rs.) (Amount in Rs.)
Cumulative tax
depreciation 30 30% 9
Proceeds in
excess of cost 50 nil -
Total 80 9
(Note: in accordance with paragraph 61A, the additional deferred tax that
arises on the revaluation is recognised in other comprehensive income)
Example C
The facts are as in example B, except that if the item is sold for
more than cost, the cumulative tax depreciation will be included in
taxable income (taxed at 30%) and the sale proceeds will be taxed
at 40%, after deducting an inflation-adjusted cost of Rs.. 110.
If the entity expects to recover the carrying amount by using the
item, it must generate taxable income of Rs.. 150, but will only be
able to deduct depreciation of Rs.. 70. On this basis, the tax base is
Rs. 70, there is a taxable temporary difference of Rs. 80 and there
is a deferred tax liability of Rs. 24 (Rs. 80 at 30%), as in example B.
If the entity expects to recover the carrying amount by selling the
item immediately for proceeds of Rs.. 150, the entity will be able to
deduct the indexed cost of Rs.. 110. The net proceeds of Rs.. 40
will be taxed at 40%. In addition, the cumulative tax depreciation of
Rs. 30 will be included in taxable income and taxed at 30%. On this
basis, the tax base is Rs. 80 (Rs. 110 less Rs. 30), there is a
taxable temporary difference of Rs.. 70 and there is a deferred tax

liability of Rs. 25 (Rs. 40 at 40% plus Rs. 30 at 30%). If the tax base
is not immediately apparent in this example, it may be helpful to
consider the fundamental principle set out in paragraph 10.
(note: in accordance with paragraph 61A, the additional deferred tax that
arises on the revaluation is recognised in other comprehensive income)
51B If a deferred tax liability or deferred tax asset arises from a non-
depreciable asset measured using the revaluation model in Ind AS 16,
the measurement of the deferred tax liability or deferred tax asset shall
reflect the tax consequences of recovering the carrying amount of the
non-depreciable asset through sale, regardless of the basis of
measuring the carrying amount of that asset. Accordingly, if the tax
law specifies a tax rate applicable to the taxable amount derived from
the sale of an asset that differs from the tax rate applicable to the
taxable amount derived from using an asset, the former rate is applied
in measuring the deferred tax liability or asset related to a non-
depreciable asset.
51C – (Refer Appendix 1)
51D
51E Paragraph 51B does not change the requirements to apply the
principles in paragraphs 24–33 (deductible temporary differences) and
paragraphs 34–36 (unused tax losses and unused tax credits) of this
Standard when recognising and measuring deferred tax assets.
52 [Moved and renumbered 51A]
52A In some jurisdictions, income taxes are payable at a higher or lower
rate if part or all of the net profit or retained earnings is paid out as a
dividend to shareholders of the entity. In some other jurisdictions,
income taxes may be refundable or payable if part or all of the net
profit or retained earnings is paid out as a dividend to shareholders of
the entity. In these circumstances, current and deferred tax assets and
liabilities are measured at the tax rate applicable to undistributed
profits.
52B Omitted7
7 Refer Appendix 1. Omitted vide Notification No. G.S.R. 274(E) dated 30th March, 2019.
8Example illustrating paragraphs 52A and 57A

The following example deals with the measurement of current and
deferred tax assets and liabilities for an entity in a jurisdiction
where income taxes are payable at a higher rate on undistributed
profits (50%) with an amount being refundable when profits are
distributed. The tax rate on distributed profits is 35%. At the end of
the reporting period, 31 December 20X1, the entity does not
recognise a liability for dividends proposed or declared after the
reporting period. As a result, no dividends are recognised in the
year 20X1. Taxable income for 20X1 is Rs. 100,000. The net
taxable temporary difference for the year 20X1 is Rs. 40,000.
The entity recognises a current tax liability and a current income
tax expense of Rs. 50,000. No asset is recognised for the amount
potentially recoverable as a result of future dividends. The entity
also recognises a deferred tax liability and deferred tax expense of
Rs. 20,000 (Rs. 40,000 at 50%) representing the income taxes that
the entity will pay when it recovers or settles the carrying amounts
of its assets and liabilities based on the tax rate applicable to
undistributed profits.
Subsequently, on 15 March 20X2 the entity recognises dividends of
Rs. 10,000 from previous operating profits as a liability.
On 15 March 20X2, the entity recognises the recovery of income
taxes of Rs. 1,500 (15% of the dividends recognised as a liability)
as a current tax asset and as a reduction of current income tax
expense for 20X2.
53 Deferred tax assets and liabilities shall not be discounted.
54 The reliable determination of deferred tax assets and liabilities on a
discounted basis requires detailed scheduling of the timing of the
reversal of each temporary difference. In many cases such scheduling
is impracticable or highly complex. Therefore, it is inappropriate to
require discounting of deferred tax assets and liabilities. To permit, but
not to require, discounting would result in deferred tax assets and
liabilities which would not be comparable between entities. Therefore,
this Standard does not require or permit the discounting of deferred
tax assets and liabilities.
55 Temporary differences are determined by reference to the carrying

amount of an asset or liability. This applies even where that carrying
amount is itself determined on a discounted basis, for example in the
case of retirement benefit obligations (see Ind AS 19, Employee
Benefits).
56 The carrying amount of a deferred tax asset shall be reviewed at
the end of each reporting period. An entity shall reduce the
carrying amount of a deferred tax asset to the extent that it is no
longer probable that sufficient taxable profit will be available to
allow the benefit of part or all of that deferred tax asset to be
utilised. Any such reduction shall be reversed to the extent that it
becomes probable that sufficient taxable profit will be available.
Recognition of current and deferred tax

57 Accounting for the current and deferred tax effects of a transaction or
other event is consistent with the accounting for the transaction or
event itself. Paragraphs 58 to 68C implement this principle.
57A 9An entity shall recognise the income tax consequences of dividends
as defined in Ind AS 109 when it recognises a liability to pay a
dividend. The income tax consequences of dividends are linked more
directly to past transactions or events that generated distributable
profits than to distributions to owners. Therefore, an entity shall
recognise the income tax consequences of dividends in profit or loss,
other comprehensive income or equity according to where the entity
originally recognised those past transactions or events.
Items recognised in profit or loss
58 Current and deferred tax shall be recognised as income or an
expense and included in profit or loss for the period, except to
the extent that the tax arises from:
(a) a transaction or event which is recognised, in the same or a
different period, outside profit or loss, either in other
comprehensive income or directly in equity (see paragraphs
61A -65); or
(b) a business combination (other than the acquisition by an
9 Inserted vide Notification No. G.S.R. 274(E) dated 30th March, 2019.
investment entity, as defined in Ind AS 110, Consolidated

Financial Statements, of a subsidiary that is required to be
measured at fair value through profit or loss) (see
paragraphs 66 -68).
59 Most deferred tax liabilities and deferred tax assets arise where
income or expense is included in accounting profit in one period, but is
included in taxable profit (tax loss) in a different period. The resulting
deferred tax is recognised in profit or loss. Examples are when:
(a) 10interest, royalty or dividend revenue is received in arrears and
is included in accounting profit in accordance with Ind AS 115,
Revenue from Contracts with Customers, or Ind AS 109,
Financial Instruments, as relevant, but is included in taxable
profit (tax loss) on a cash basis; and
(b) costs of intangible assets have been capitalised in accordance
with Ind AS 38 and are being amortised in profit or loss, but
were deducted for tax purposes when they were incurred.
60 The carrying amount of deferred tax assets and liabilities may change
even though there is no change in the amount of the related tempor ary
differences. This can result, for example, from:
(a) a change in tax rates or tax laws;
(b) a reassessment of the recoverability of deferred tax assets; or
(c) a change in the expected manner of recovery of an asset.
The resulting deferred tax is recognised in profit or loss, except to the
extent that it relates to items previously recognised outside profit or
loss (see paragraph 63).
Items recognised outside profit or loss
61A Current tax and deferred tax shall be recognised outside profit or
loss if the tax relates to items that are recognised, in the same or
a different period, outside profit or loss. Therefore, current tax
and deferred tax that relates to items that are recognised, in the
same or a different period:
10 Substituted vide Notification No. G.S.R. 365(E) dated 30 th March, 2016 and,
thereafter, substituted vide Notification No. G.S.R. 310(E) dated 28th March,
2018.
(a) in other comprehensive income, shall be recognised in

other comprehensive income (see paragraph 62).
(b) directly in equity, shall be recognised directly in equity (see
paragraph 62A).
62 Indian Accounting Standards require or permit particular items to be
recognised in other comprehensive income. Examples of such items
are:
(a) a change in carrying amount arising from the revaluation of
property, plant and equipment (see Ind AS 16); and
(b) [Refer Appendix 1]
(c) exchange differences arising on the translation of the financial
statements of a foreign operation (see Ind AS 21).
(d) [Refer Appendix 1]
62A Indian Accounting Standards require or permit particular items to be
credited or charged directly to equity. Examples of such items are:
(a) an adjustment to the opening balance of retained earnings
resulting from either a change in accounting policy that is
applied retrospectively or the correction of an error (see Ind AS
8, Accounting Policies, Changes in Accounting Estimates and
Errors); and
(b) amounts arising on initial recognition of the equity component of
a compound financial instrument (see paragraph 23).
63 In exceptional circumstances it may be difficult to determine the
amount of current and deferred tax that relates to items recognised
outside profit or loss (either in other comprehensive income or directly
in equity). This may be the case, for example, when:
(a) there are graduated rates of income tax and it is impossible to
determine the rate at which a specific component of taxable
profit (tax loss) has been taxed;
(b) a change in the tax rate or other tax rules affects a deferred tax
asset or liability relating (in whole or in part) to an item that was
previously recognised outside profit or loss; or
(c) an entity determines that a deferred tax asset should be
recognised, or should no longer be recognised in full, and the
deferred tax asset relates (in whole or in part) to an item that
was previously recognised outside profit or loss.

In such cases, the current and deferred tax related to items that are
recognised outside profit or loss are based on a reasonable pro rata
allocation of the current and deferred tax of the entity in the tax
jurisdiction concerned, or other method that achieves a more
appropriate allocation in the circumstances.
64 Ind AS 16 does not specify whether an entity should transfer each year
from revaluation surplus to retained earnings an amount equal to the
difference between the depreciation or amortisation on a revalued
asset and the depreciation or amortisation based on the cost of that
asset. If an entity makes such a transfer, the amount transferred is net
of any related deferred tax. Similar considerations apply to transfers
made on disposal of an item of property, plant or equipment.
65 When an asset is revalued for tax purposes and that revaluation is
related to an accounting revaluation of an earlier period, or to one that
is expected to be carried out in a future period, the tax effects of both
the asset revaluation and the adjustment of the tax base are
recognised in other comprehensive income in the periods in which
they occur. However, if the revaluation for tax purposes is not related
to an accounting revaluation of an earlier period, or to one that is
expected to be carried out in a future period, the tax effects of the
adjustment of the tax base are recognised in profit or loss.
65A When an entity pays dividends to its shareholders, it may be required
to pay a portion of the dividends to taxation authorities on behalf of
shareholders. In many jurisdictions, this amount is referred to as a
withholding tax. Such an amount paid or payable to taxation
authorities is charged to equity as a part of the dividends.
Deferred tax arising from a business combination
66 As explained in paragraphs 19 and 26(c), temporary differences may
arise in a business combination. In accordance with Ind AS 103, an
entity recognises any resulting deferred tax assets (to the extent that
they meet the recognition criteria in paragraph 24) or deferred tax
liabilities as identifiable assets and liabilities at the acquisition date.
Consequently, those deferred tax assets and deferred tax liabilities
affect the amount of goodwill or the bargain purchase gain the entity
recognises. However, in accordance with paragraph 15(a), an entity
does not recognise deferred tax liabilities arising from the initial
recognition of goodwill.
67 As a result of a business combination, the probability of realising a
pre-acquisition deferred tax asset of the acquirer could change. An
acquirer may consider it probable that it will recover its own deferred
tax asset that was not recognised before the business combination.
For example, the acquirer may be able to utilise the benefit of its
unused tax losses against the future taxable profit of the acquiree.
Alternatively, as a result of the business combination it might no longer
be probable that future taxable profit will allow the deferred tax asset
to be recovered. In such cases, the acquirer recognises a change in
the deferred tax asset in the period of the business combination, but
does not include it as part of the accounting for the business
combination. Therefore, the acquirer does not take it into account in
measuring the goodwill or bargain purchase gain it recognises in the
business combination.
68 The potential benefit of the acquiree’s income tax loss carryforwards
or other deferred tax assets might not satisfy the criteria for separate
recognition when a business combination is initially accounted for but
might be realised subsequently. An entity shall recognise acquired
deferred tax benefits that it realises after the business combination as
follows:
(a) Acquired deferred tax benefits recognised within the
measurement period that result from new information about
facts and circumstances that existed at the acquisition date shall
be applied to reduce the carrying amount of any goodwill related
to that acquisition. If the carrying amount of that goodwill is
zero, any remaining deferred tax benefits shall be recognised in
other comprehensive income and accumulated in equity as
capital reserve or recognised directly in capital reserve,
depending on whether paragraph 34 or paragraph 36A of Ind AS
103, would have applied had the measurement period
adjustments been known on the date of acquisition itself.
(b) All other acquired deferred tax benefits realised shall be
recognised in profit or loss (or, if this Standard so requires,
outside profit or loss).
Current and deferred tax arising from share-based

payment transactions
68A In some tax jurisdictions, an entity receives a tax deduction (ie an
amount that is deductible in determining taxable profit) that relates to
remuneration paid in shares, share options or other equity instruments
of the entity. The amount of that tax deduction may differ from the
related cumulative remuneration expense, and may arise in a later
accounting period. For example, in some jurisdictions, an entity may
recognise an expense for the consumption of employee services
received as consideration for share options granted, in accordance
with Ind AS 102, Share-based Payment, and not receive a tax
deduction until the share options are exercised, with the measurement
of the tax deduction based on the entity’s share price at the date of
exercise.
68B As with the preliminary expenses discussed in paragraphs 9 and 26(b)
of this Standard, the difference between the tax base of the employee
services received to date (being the amount permitted as a deduction
in future periods under taxation laws), and the carrying amount of nil,
is a deductible temporary difference that results in a deferred tax
asset. If the amount permitted as a deduction in future periods under
taxation laws is not known at the end of the period, it shall be
estimated, based on information available at the end of the period. For
example, if the amount permitted as a deduction in future periods
under taxation laws is dependent upon the entity’s share price at a
future date, the measurement of the deductible temporary difference
should be based on the entity’s share price at the end of the period.
68C As noted in paragraph 68A, the amount of the tax deduction (or
estimated future tax deduction, measured in accordance with
paragraph 68B) may differ from the related cumulative remuneration
expense. Paragraph 58 of the Standard requires that current and
deferred tax should be recognised as income or an expense and
included in profit or loss for the period, except to the extent that the tax
arises from (a) a transaction or event that is recognised, in the same
or a different period, outside profit or loss, or (b) a business
combination (other than the acquisition by an investment entity of a
subsidiary that is required to be measured at fair value through profit
or loss). If the amount of the tax deduction (or estimated future tax
deduction) exceeds the amount of the related cumulative remuneration
expense, this indicates that the tax deduction relates not only to
remuneration expense but also to an equity item. In this situation, the
excess of the associated current or deferred tax should be recognised
directly in equity.
Presentation
Tax assets and tax liabilities
69- [Refer Appendix 1]
70
Offset
71 An entity shall offset current tax assets and current tax liabilities
if, and only if, the entity:
(a) has a legally enforceable right to set off the recognised
amounts; and
(b) intends either to settle on a net basis, or to realise the asset
and settle the liability simultaneously.
72 Although current tax assets and liabilities are separately recognised
and measured they are offset in the balance sheet subject to criteria
similar to those established for financial instruments in Ind AS 32. An
entity will normally have a legally enforceable right to set off a current
tax asset against a current tax liability when they relate to income
taxes levied by the same taxation authority and the taxation laws
permit the entity to make or receive a single net payment.
73 In consolidated financial statements, a current tax asset of one entity
in a group is offset against a current tax liability of another entity in the
group if, and only if, the entities concerned have a legally enforceable
right to make or receive a single net payment and the entities intend to
make or receive such a net payment or to recover the asset and settle
the liability simultaneously.
74 An entity shall offset deferred tax assets and deferred tax
liabilities if, and only if:
(a) the entity has a legally enforceable right to set off current
tax assets against current tax liabilities; and
(b) the deferred tax assets and the deferred tax liabilities relate
to income taxes levied by the same taxation authority on
either:
(i) the same taxable entity; or
(ii) different taxable entities which intend either to settle
current tax liabilities and assets on a net basis, or to
realise the assets and settle the liabilities
simultaneously, in each future period in which
significant amounts of deferred tax liabilities or
assets are expected to be settled or recovered.
75 To avoid the need for detailed scheduling of the timing of the reversal
of each temporary difference, this Standard requires an entity to set off
a deferred tax asset against a deferred tax liability of the same taxable
entity if, and only if, they relate to income taxes levied by the same
taxation authority and the entity has a legally enforceable right to set
off current tax assets against current tax liabilities.
76 In rare circumstances, an entity may have a legally enforceable right of
set-off, and an intention to settle net, for some periods but not for
others. In such rare circumstances, detailed scheduling may be
required to establish reliably whether the deferred tax liability of one
taxable entity will result in increased tax payments in the same period
in which a deferred tax asset of another taxable entity will result in
decreased payments by that second taxable entity.
Tax expense
Tax expense (income) related to profit or loss from ordinary
activities
77 The tax expense (income) related to profit or loss from ordinary
activities shall be presented as part of profit or loss in the
statement of profit and loss.
77A [Refer Appendix 1]
Exchange differences on deferred foreign tax liabilities or assets
78 Ind AS 21 requires certain exchange differences to be recognised as
income or expense but does not specify where such differences should
be presented in the statement of profit and loss. Accordingly, where
exchange differences on deferred foreign tax liabilities or assets are
recognised in the statement of profit and loss, such differences may be
classified as deferred tax expense (income) if that presentation is
considered to be the most useful to financial statement users.
Disclosure
79 The major components of tax expense (income) shall be
disclosed separately.
80 Components of tax expense (income) may include:
(a) current tax expense (income);
(b) any adjustments recognised in the period for current tax of prior
periods;
(c) the amount of deferred tax expense (income) relating to the
origination and reversal of temporary differences;
(d) the amount of deferred tax expense (income) relating to
changes in tax rates or the imposition of new taxes;
(e) the amount of the benefit arising from a previously unrecognised
tax loss, tax credit or temporary difference of a prior period that
is used to reduce current tax expense;
(f) the amount of the benefit from a previously unrecognised tax
loss, tax credit or temporary difference of a prior period that is
used to reduce deferred tax expense;
(g) deferred tax expense arising from the write-down, or reversal of
a previous write-down, of a deferred tax asset in accordance
with paragraph 56; and
(h) the amount of tax expense (income) relating to those changes in
accounting policies and errors that are included in profit or loss
in accordance with Ind AS 8, because they cannot be accounted
for retrospectively.
81 The following shall also be disclosed separately:
(a) the aggregate current and deferred tax relating to items that
are charged or credited directly to equity (see paragraph
62A);
(ab) the amount of income tax relating to each component of
other comprehensive income (see paragraph 62 and Ind AS
1);
(b) [Refer Appendix 1];
(c) an explanation of the relationship between tax expense
(income) and accounting profit in either or both of the

following forms:
(i) a numerical reconciliation between tax expense
(income) and the product of accounting profit
multiplied by the applicable tax rate(s), disclosing
also the basis on which the applicable tax rate(s) is
(are) computed; or
(ii) a numerical reconciliation between the average
effective tax rate and the applicable tax rate,
disclosing also the basis on which the applicable tax
rate is computed;
(d) an explanation of changes in the applicable tax rate(s)
compared to the previous accounting period;
(e) the amount (and expiry date, if any) of deductible temporary
differences, unused tax losses, and unused tax credits for
which no deferred tax asset is recognised in the balance
sheet;
(f) the aggregate amount of temporary differences associated
with investments in subsidiaries, branches and associates
and interests in joint arrangements, for which deferred tax
liabilities have not been recognised (see paragraph 39);
(g) in respect of each type of temporary difference, and in
respect of each type of unused tax losses and unused tax
credits:
(i) the amount of the deferred tax assets and liabilities
recognised in the balance sheet for each period
presented;
(ii) the amount of the deferred tax income or expense
recognised in profit or loss, if this is not apparent
from the changes in the amounts recognised in the
balance sheet;
(h) in respect of discontinued operations, the tax expense
relating to:
(i) the gain or loss on discontinuance; and
(ii) the profit or loss from the ordinary activities of the
discontinued operation for the period, together with

the corresponding amounts for each prior period
presented;
(i) the amount of income tax consequences of dividends to
shareholders of the entity that were proposed or declared
before the financial statements were approved for issue,
but are not recognised as a liability in the financial
statements;
(j) if a business combination in which the entity is the acquirer
causes a change in the amount recognised for its pre-
acquisition deferred tax asset (see paragraph 67), the
amount of that change; and
(k) if the deferred tax benefits acquired in a business
combination are not recognised at the acquisition date but
are recognised after the acquisition date (see paragraph
68), a description of the event or change in circumstances
that caused the deferred tax benefits to be recognised.
82 An entity shall disclose the amount of a deferred tax asset and
the nature of the evidence supporting its recognition, when:
(a) the utilisation of the deferred tax asset is dependent on
future taxable profits in excess of the profits arising from
the reversal of existing taxable temporary differences; and
(b) the entity has suffered a loss in either the current or
preceding period in the tax jurisdiction to which the
deferred tax asset relates.
82A In the circumstances described in paragraph 52A, an entity shall
disclose the nature of the potential income tax consequences that
would result from the payment of dividends to its shareholders. In
addition, the entity shall disclose the amounts of the potential
income tax consequences practicably determinable and whether
there are any potential income tax consequences not practicably
determinable.
84 The disclosures required by paragraph 81(c) enable users of financial
statements to understand whether the relationship between tax
expense (income) and accounting profit is unusual and to understand
the significant factors that could affect that relationship in the future.
The relationship between tax expense (income) and accounting profit
may be affected by such factors as revenue that is exempt from
taxation, expenses that are not deductible in determining taxable profit
(tax loss), the effect of tax losses and the effect of foreign tax rates.
85 In explaining the relationship between tax expense (income) and
accounting profit, an entity uses an applicable tax rate that provides
the most meaningful information to the users of its financial
statements. Often, the most meaningful rate is the domestic rate of tax
in the country in which the entity is domiciled, aggregating the tax rate
applied for national taxes with the rates applied for any local taxes
which are computed on a substantially similar level of taxable profit
(tax loss). However, for an entity operating in several jurisdictions, it
may be more meaningful to aggregate separate reconciliations
prepared using the domestic rate in each individual jurisdiction. The
following example illustrates how the selection of the applicable tax
rate affects the presentation of the numerical reconciliation.
Example illustrating paragraph 85
In 19X2, an entity has accounting profit in its own jurisdiction
(country A) of Rs. 1,500 (19X1: Rs. 2,000) and in country B of Rs.
1,500 (19X1: Rs. 500). The tax rate is 30% in country A and 20% in
country B. In country A, expenses of Rs. 100 (19X1: Rs. 200) are not
deductible for tax purposes.
The following is an example of a reconciliation to the domestic tax
rate.
(Amount in Rs.)
19X1 19X2
Accounting profit 2,500 3,000
Tax at the domestic rate of 30% 750 900
Tax effect of expenses that are not
deductible for tax purposes 60 30
Effect of lower tax rates in country B (50) (150)
Tax expense 760 780
86 The average effective tax rate is the tax expense (income) divided by
the accounting profit.
87 It would often be impracticable to compute the amount of
unrecognised deferred tax liabilities arising from investments in

subsidiaries, branches and associates and interests in joint
arrangements (see paragraph 39). Therefore, this Standard requires
an entity to disclose the aggregate amount of the underlying temporary
differences but does not require disclosure of the deferred tax
liabilities. Nevertheless, where practicable, entities are encouraged to
disclose the amounts of the unrecognised deferred tax liabilities
because financial statement users may find such information useful.
87A Paragraph 82A requires an entity to disclose the nature of the potential
income tax consequences that would result from the payment of
dividends to its shareholders. An entity discloses the important
features of the income tax systems and the factors that will affect the
amount of the potential income tax consequences of dividends.
87B It would sometimes not be practicable to compute the total amount of
the potential income tax consequences that would result from the
payment of dividends to shareholders. This may be the case, for
example, where an entity has a large number of foreign subsidiaries.
However, even in such circumstances, some portions of the total
amount may be easily determinable. For example, in a consolidated
group, a parent and some of its subsidiaries may have paid income
taxes at a higher rate on undistributed profits and be aware of the
amount that would be refunded on the payment of future dividends to
shareholders from consolidated retained earnings. In this case, that
refundable amount is disclosed. If applicable, the entity also discloses
that there are additional potential income tax consequences not
practicably determinable. In the parent’s separate financial statements,
if any, the disclosure of the potential income tax consequences relates
to the parent’s retained earnings.
87C An entity required to provide the disclosures in paragraph 82A may
also be required to provide disclosures related to temporary
differences associated with investments in subsidiaries, branches and
associates or interests in joint arrangements. In such cases, an entity
considers this in determining the information to be disclosed under
paragraph 82A. For example, an entity may be required to disclose the
aggregate amount of temporary differences associated with
investments in subsidiaries for which no deferred tax liabilities have
been recognised (see paragraph 81(f)). If it is impracticable to
compute the amounts of unrecognised deferred tax liabilities (see
paragraph 87) there may be amounts of potential income tax

consequences of dividends not practicably determinable related to
these subsidiaries.
88 An entity discloses any tax-related contingent liabilities and contingent
assets in accordance with Ind AS 37, Provisions, Contingent Liabilities
and Contingent Assets. Contingent liabilities and contingent assets
may arise, for example, from unresolved disputes with the taxation
authorities. Similarly, where changes in tax rates or tax laws are
enacted or announced after the reporting period, an entity discloses
any significant effect of those changes on its current and deferred tax
assets and liabilities (see Ind AS 10, Events after the Reporting
Period).
11Effective Date
89 *
90 *
91 *
92 *
93 *
94 *
95 *
96 *
97 *
98 *
98A *
98B *
98C *
98D *
98E As a consequence of issuance of Ind AS 115, Revenue from
Contracts with Customers, paragraph 59 is amended. An entity shall
11 Heading and paragraphs 89-98G inserted vide Notification No. G.S.R. 310(E)
dated 28th March, 2018.
* Refer Appendix 1
apply those amendments when it applies Ind AS 115.

98F *
98G 12Ind
AS 116 amended paragraph 20. An entity shall apply that
amendment when it applies Ind AS 116
98H Recognition of Deferred Tax Assets for Unrealised Losses
(Amendments to Ind AS 12) amended paragraph 29 and added
paragraphs 27A, 29A and 89-98F and the example following
paragraph 26. An entity shall apply those amendments for annual
periods beginning on or after April 01, 2018. An entity shall apply
those amendments retrospectively in accordance with Ind AS 8,
Accounting Policies, Changes in Accounting Estimates and Errors.
However, on initial application of the amendment, the change in the
opening equity of the earliest comparative period may be recognised in
opening retained earnings (or in another component of equity, as
appropriate), without allocating the change between opening retained
earnings and other components of equity. If an entity applies this
relief, it shall disclose that fact.
98I 13Annual Improvements to Ind AS (2018) added paragraph 57A and
deleted paragraph 52B. An entity shall apply those amendments for
annual reporting periods beginning on or after 1 April, 2019.
* Refer Appendix 1
12 Paragraphs 98G-98H substituted vide Notification No. G.S.R. 273(E) dated 30th
March, 2019.
13 Inserted vide Notification No. G.S.R. 274(E) dated 30th March, 2019.
Appendix A
Income Taxes—Changes in the Tax Status of an Entity or
its Shareholders
This Appendix is an integral part of the Ind AS.
Issue
1 A change in the tax status of an entity or of its shareholders may have
consequences for an entity by increasing or decreasing its tax
liabilities or assets. This may, for example, occur upon the public
listing of an entity’s equity instruments or upon the restructuring of an
entity’s equity. It may also occur upon a controlling shareholder’s
move to a foreign country. As a result of such an event, an entity may
be taxed differently; it may for example gain or lose tax incentives or
become subject to a different rate of tax in the future.
2 A change in the tax status of an entity or its shareholders may have an
immediate effect on the entity’s current tax liabilities or assets. The
change may also increase or decrease the deferred tax liabilities and
assets recognised by the entity, depending on the effect the change in
tax status has on the tax consequences that will arise from recovering
or settling the carrying amount of the entity’s assets and liabilities.
3 The issue is how an entity should account for the tax consequences of
a change in its tax status or that of its shareholders.
Accounting Principles
4 A change in the tax status of an entity or its shareholders does not
give rise to increases or decreases in amounts recognised outside
profit or loss. The current and deferred tax consequences of a change
in tax status shall be included in profit or loss for the period, unless
those consequences relate to transactions and events that result, in
the same or a different period, in a direct credit or charge to the
recognised amount of equity or in amounts recognised in other
comprehensive income. Those tax consequences that relate to
changes in the recognised amount of equity, in the same or a different
period (not included in profit or loss), shall be charged or credited
directly to equity. Those tax consequences that relate to amounts
recognised in other comprehensive income shall be recognised in
other comprehensive income.
Appendix B
References to matters contained in other Indian
Accounting Standards
This Appendix is an integral part of the Ind AS.
1 Appendix A, Applying the Restatement Approach under Ind AS 29,
Financial Reporting in Hyperinflationary Economies, contained in Ind
AS 29, Financial Reporting in Hyperinflationary Economies, makes
reference to Ind AS 12.
2 Appendix C, Levies, contained in Ind AS 37, Provisions, Contingent
Liabilities and Contingent Assets.
14Appendix C, Uncertainty over Income Tax

Treatments
This appendix is an integral part of the Ind AS and has the same authority as the other
parts of the Ind AS
Background
1. Ind AS 12, Income Taxes, specifies requirements for current and deferred
tax assets and liabilities. An entity applies the requirements in Ind AS 12
based on applicable tax laws.
2. It may be unclear how tax law applies to a particular transaction or
circumstance. The acceptability of a particular tax treatment under tax law
may not be known until the relevant taxation authority or a court takes a
decision in the future. Consequently, a dispute or examination of a
particular tax treatment by the taxation authority may affect an entity’s
accounting for a current or deferred tax asset or liability.
3. In this Appendix:
(a) ‘tax treatments’ refers to the treatments used by an entity or that it
plans to use in its income tax filings.
(b) ‘taxation authority’ refers to the body or bodies that decide whether
tax treatments are acceptable under tax law. This might include a
court.
(c) an ‘uncertain tax treatment’ is a tax treatment for which there is
uncertainty over whether the relevant taxation authority will accept
the tax treatment under tax law. For example, an entity’s decision
not to submit any income tax filing in a tax jurisdiction, or not to
include particular income in taxable profit, is an uncertain tax
treatment if its acceptability is uncertain under tax law.
Scope
4. This Appendix clarifies how to apply the recognition and measurement
14 Appendix Inserted vide Notification No. G.S.R. 274(E) dated 30th March, 2019.
requirements in Ind AS 12 when there is uncertainty over income tax

treatments. In such a circumstance, an entity shall recognise and measure
its current or deferred tax asset or liability applying the requirements in Ind
AS 12 based on taxable profit (tax loss), tax bases, unused tax losses,
unused tax credits and tax rates determined applying this Appendix.
Issues
5. When there is uncertainty over income tax treatments, this Appendix
addresses:
(a) whether an entity considers uncertain tax treatments separately;
(b) the assumptions an entity makes about the examination of tax
treatments by taxation authorities;
(c) how an entity determines taxable profit (tax loss), tax bases,
unused tax losses, unused tax credits and tax rates; and
(d) how an entity considers changes in facts and circumstances.
Accounting Principles
Whether an entity considers uncertain tax treatments

separately
6. An entity shall determine whether to consider each uncertain tax treatment
separately or together with one or more other uncertain tax treatments
based on which approach better predicts the resolution of the uncertainty.
In determining the approach that better predicts the resolution of the
uncertainty, an entity might consider, for example, (a) how it prepares its
income tax filings and supports tax treatments; or (b) how the entity
expects the taxation authority to make its examination and resolve issues
that might arise from that examination.
7. If, applying paragraph 6, an entity considers more than one uncertain tax
treatment together, the entity shall read references to an ‘uncertain tax
treatment’ in this Appendix as referring to the group of uncertain tax
treatments considered together.
Examination by taxation authorities

8. In assessing whether and how an uncertain tax treatment affects the
determination of taxable profit (tax loss), tax bases, unused tax losses,
unused tax credits and tax rates, an entity shall assume that a taxation
authority will examine amounts it has a right to examine and have full
knowledge of all related information when making those examinations.
Determination of taxable profit (tax loss), tax bases,

unused tax losses, unused tax credits and tax rates
9. An entity shall consider whether it is probable that a taxation authority will
accept an uncertain tax treatment.
10. If an entity concludes it is probable that the taxation authority will accept
an uncertain tax treatment, the entity shall determine the taxable profit (tax
loss), tax bases, unused tax losses, unused tax credits or tax rates
consistently with the tax treatment used or planned to be used in its
income tax filings.
11. If an entity concludes it is not probable that the taxation authority will
accept an uncertain tax treatment, the entity shall reflect the effect of
uncertainty in determining the related taxable profit (tax loss), tax bases,
unused tax losses, unused tax credits or tax rates. An entity shall reflect
the effect of uncertainty for each uncertain tax treatment by using either of
the following methods, depending on which method the entity expects to
better predict the resolution of the uncertainty:
(a) The most likely amount—the single most likely amount in a range of
possible outcomes. The most likely amount may better predict the
resolution of the uncertainty if the possible outcomes are binary or are
concentrated on one value.
(b) The expected value—the sum of the probability-weighted amounts in
a range of possible outcomes. The expected value may better predict
the resolution of the uncertainty if there is a range of possible
outcomes that are neither binary nor concentrated on one value.
12. If an uncertain tax treatment affects current tax and deferred tax (for
example, if it affects both taxable profit used to determine current tax and
tax bases used to determine deferred tax), an entity shall make consistent
judgements and estimates for both current tax and deferred tax.
Changes in facts and circumstances

13. An entity shall reassess a judgement or estimate required by this
Appendix if the facts and circumstances on which the judgement or
estimate was based change or as a result of new information that affects
the judgement or estimate. For example, a change in facts and
circumstances might change an entity’s conclusions about the
acceptability of a tax treatment or the entity’s estimate of the effect of
uncertainty, or both. Paragraphs A1–A3 set out guidance on changes in
facts and circumstances.
14. An entity shall reflect the effect of a change in facts and circumstances or
of new information as a change in accounting estimate applying Ind AS 8,
Accounting Policies, Changes in Accounting Estimates and Errors. An
entity shall apply Ind AS 10, Events after the Reporting Period, to
determine whether a change that occurs after the reporting period is an
adjusting or non-adjusting event.
Application Guidance
This Application Guidance is an integral part of Appendix C and has the same authority
as the other parts of Appendix C.
Changes in facts and circumstances (paragraph 13)

A1 In applying paragraph 13 of this Appendix, an entity shall assess the
relevance and effect of a change in facts and circumstances or of new
information in the context of applicable tax laws. For example, a particular
event might result in the reassessment of a judgement or estimate made
for one tax treatment but not another, if those tax treatments are subject to
different tax laws.
A2 Examples of changes in facts and circumstances or new information that,
depending on the circumstances, can result in the reassessment of a
judgement or estimate required by this Appendix include, but are not limited
to, the following:
(a) examinations or actions by a taxation authority. For example:
(i) agreement or disagreement by the taxation authority with the
tax treatment or a similar tax treatment used by the entity;
(ii) information that the taxation authority has agreed or disagreed
with a similar tax treatment used by another entity; and
(iii) information about the amount received or paid to settle a
similar tax treatment.
(b) changes in rules established by a taxation authority.
(c) the expiry of a taxation authority’s right to examine or re-examine a tax
treatment.
A3 The absence of agreement or disagreement by a taxation authority with a
tax treatment, in isolation, is unlikely to constitute a change in facts and
circumstances or new information that affects the judgements and
estimates required by this Appendix.
Disclosure
A4 When there is uncertainty over income tax treatments, an entity shall
determine whether to disclose:
(a) judgements made in determining taxable profit (tax loss), tax
bases, unused tax losses, unused tax credits and tax rates
applying paragraph 122 of Ind AS 1, Presentation of Financial
Statements; and
(b) information about the assumptions and estimates made in
determining taxable profit (tax loss), tax bases, unused tax
losses, unused tax credits and tax rates applying paragraphs
125–129 of Ind AS 1.
A5 If an entity concludes it is probable that a taxation authority will accept an
uncertain tax treatment, the entity shall determine whether to disclose the
potential effect of the uncertainty as a tax-related contingency applying
paragraph 88 of Ind AS 12.
Effective date and transition

This Section is an integral part of Appendix C and has the same authority as the other
parts of the Appendix C.
Effective date
B1 An entity shall apply this Appendix for annual reporting periods beginning on
or after April 1, 2019.
Transition
B2 On initial application, an entity shall apply this Appendix either:
(a) retrospectively applying Ind AS 8, if that is possible without the use of
hindsight; or
(b) retrospectively with the cumulative effect of initially applying the Appendix
recognised at the date of initial application. If an entity selects this
transition approach, it shall not restate comparative information. Instead,
the entity shall recognise the cumulative effect of initially applying the
Appendix as an adjustment to the opening balance of retained earnings
(or other component of equity, as appropriate). The date of initial
application is the beginning of the annual reporting period in which an
entity first applies this Appendix.
Appendix 1
Note15: This Appendix is not a part of the Indian Accounting Standard. The
purpose of this Appendix is only to bring out the major differences, if any, between
Indian Accounting Standard (Ind AS) 12 and the corresponding International
Accounting Standard (IAS) 12, Income Taxes, IFRIC 23 Uncertainty over Income
Tax Treatments and SIC 25, Income Taxes—Changes in the Tax Status of an Entity
or its Shareholders, issued by the International Accounting Standards Board.
16Comparison with IAS 12, Income Taxes, IFRIC 23

and SIC 25
1 The transitional provisions given in SIC 25 have not been given in Ind
AS 12, since all transitional provisions related to Ind ASs, wherever
considered appropriate, have been included in Ind AS 101, First-time
Adoption of Indian Accounting Standards corresponding to IFRS 1,
First-time Adoption of International Financial Reporting Standards.
2 Different terminology is used, as used in existing laws eg, the term
‘balance sheet’ is used instead of ‘Statement of financial position’ and
‘Statement of profit and loss’ is used instead of ‘Statement of
comprehensive income’. Words ‘approved for issue’ have been used
instead of ‘authorised for issue’ in the context of financial statements
considered for the purpose of events after the reporting period.
3 Requirements regarding presentation of tax expense (income) in the
separate income statement, where separate income statement is
presented, have been deleted. This change is consequential to the
removal of option regarding the two statement approach in Ind AS 1.
Ind AS 1 requires that the components of profit or loss and
components of other comprehensive income shall be presented as a
part of the statement of profit and loss.
4 The following paragraph numbers appear as ‘Deleted’ in IAS 12. In
order to maintain consistency with paragraph numbers of IAS 12, the
paragraph numbers are retained in Ind AS 12:
(i) paragraph 3
(ii) paragraph 32
(iii) paragraph 50
(iv)17 paragraph 52B
(v) paragraph 61
(vi) paragraphs 62(b) and (d)
(vii) paragraph 69
(viii) paragraph 70
(ix) paragraph 77A
(x) paragraph 81(b)
(xi) paragraph 83
5 As a consequence of not allowing fair value model in Ind AS 40,
paragraphs 51C- 51D have been deleted and the following paragraphs
have been modified in Ind AS 12:
(i) paragraph 20
(ii) paragraph 51E
6 Paragraph 68(a) has been modified as a consequence of different
accounting treatment of bargain purchase gain in Ind AS 103,
Business Combinations, in comparison to IFRS 3, Business
Combination.
7 18Omitted
8 19Paragraphs 89 to 98D and 98F of IAS 12 related to effective date

have not been included in Ind AS 12 as these are not relevant in
Indian context. However, in order to maintain consistency with
paragraph numbers of IAS 12, these paragraph numbers are retained
in Ind AS 12.
17 Sub-paragraphs (iv)-(xi) substituted vide Notification No. G.S.R. 274(E) dated 30th
March, 2019.
18 Omitted vide Notification No. G.S.R. 903(E) dated 20 th September, 2018.

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INDIAN ACCOUNTING STANDARD 12

of an Entity or its Shareholders

Indian Accounting Standard (Ind AS) 12

combination or the amount of the bargain purchase gain recognised.

future periods in respect of taxable temporary differences.

generated by using the machine is taxable, any gain on disposal

3 Current liabilities include accrued expenses with a carrying

statements, temporary differences are determined by comparing the

Recognition of current tax liabilities and current

Recognition of deferred tax liabilities and deferred

interests in joint arrangements, a deferred tax liability shall be

proportion basis but may, in some jurisdictions, be included in

and associates or interests in joint arrangements becomes

1 Substituted vide Notification No. G.S.R. 273(E) dated 30 th March, 2019.

(b) tax on capital gains is deferred if the proceeds of the disposal of

an impairment loss of Rs. 20 for that goodwill, the amount of the

amount. Such adjustments would make the financial statements

Deductible temporary differences

(d) certain assets may be carried at fair value, or may be revalued,

2 Inserted vide Notification No. G.S.R. 310(E) dated 28 th March, 2018.

3 Inserted vide Notification No. G.S.R. 310(E) dated 28 th March, 2018.

entity in the same period as the reversal of the deductible

5 Inserted vide Notification No. G.S.R. 310(E) dated 28 th March, 2018.

6 Substituted vide Notification No. G.S.R. 903(E) dated 20 th September, 2018.

Unused tax losses and unused tax credits

arrangements, except to the extent that both of the following

decisions on such matters require the consent of all the parties or a

49 When different tax rates apply to different levels of taxable income,

taxable temporary difference of Rs.. 70 and there is a deferred tax

8Example illustrating paragraphs 52A and 57A

55 Temporary differences are determined by reference to the carrying

Recognition of current and deferred tax

investment entity, as defined in Ind AS 110, Consolidated

(a) in other comprehensive income, shall be recognised in

was previously recognised outside profit or loss.

Current and deferred tax arising from share-based

(income) and accounting profit in either or both of the

discontinued operation for the period, together with

unrecognised deferred tax liabilities arising from investments in

paragraph 87) there may be amounts of potential income tax

apply those amendments when it applies Ind AS 115.

14Appendix C, Uncertainty over Income Tax

requirements in Ind AS 12 when there is uncertainty over income tax

Whether an entity considers uncertain tax treatments

Examination by taxation authorities

Determination of taxable profit (tax loss), tax bases,

Changes in facts and circumstances

Changes in facts and circumstances (paragraph 13)

Effective date and transition

16Comparison with IAS 12, Income Taxes, IFRIC 23

8 19Paragraphs 89 to 98D and 98F of IAS 12 related to effective date

19 Inserted vide Notification No. G.S.R. 310(E) dated 28 th March, 2018.

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