Current Tax Assets
Also called: Advance Income Tax
Income tax paid in advance to the IRD in instalments that exceeds the final tax due, on the Balance Sheet.
In detail
Current Tax Assets holds income tax the company has paid to the IRD ahead of the final assessment: the advance instalments due at Poush end, Chaitra end and Ashadh end, which together must reach 90 percent of the year's estimated tax, plus TDS others withheld if it is not tracked separately. At year end the company's actual tax liability is computed and provided for in Current Tax Liability; the advance paid is netted against it, and only the difference is paid or refunded. The balance therefore shows what the IRD effectively holds on the company's behalf. Paying instalments short attracts interest, so the amount here should track the estimate filed with the IRD at Poush.
Formula
Current Tax Assets = Advance tax instalments paid - Amount set off against the year's tax liability.
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Current Tax Assets | Rs 50,000 | |
| Bank Account (rename me) | Rs 50,000 |
How to record it in BRAccount
- 01Estimate the year's taxable profit and tax by Poush end with the auditor and file the estimate on the IRD portal.
- 02Pay the instalment through the bank or the portal gateway.
- 03Go to Payments > Payment Entry > New, type Pay, or a Journal Entry; debit Current Tax Assets, credit the bank.
- 04Submit. The entry above posts for the Poush end instalment; repeat at Chaitra end and Ashadh end.
- 05At year end, post the tax provision and net this balance against Current Tax Liability by Journal Entry.
When to use it
Post by Payment Entry when paying Poush, Chaitra and Ashadh instalments. Net off against Current Tax Liability at year end.
Example from the demo books
Dr Current Tax Assets Rs 50,000, Cr Bank Account Rs 50,000 for the Poush end advance tax instalment.