As per Indian Accounting Standard (Ind AS) 12, a deferred tax liability documented on a company’s balance sheet signifies an impending tax payment obligation in the future. This liability is computed by multiplying the company’s expected tax rate by the variance between its taxable income and accounting profit before taxes. The deferred tax liability accounts for the “underpaid” taxes by the company, which will be compensated for in subsequent periods. Importantly, this does not imply non-compliance with tax obligations; rather, it acknowledges a forthcoming payment that is not immediately due. Ind AS 12 provides guidelines for the recognition, measurement, and presentation of deferred tax assets and liabilities, ensuring consistency and transparency in financial reporting.
