Income Tax Expense

Income Tax Expense groups the company's own tax on profit: Current Tax, the amount computed under the Income Tax Act for the year, and Deferred Tax, the adjustment for timing differences between book and tax profit. It takes no postings; both ledgers beneath are posted by Journal Entry at Ashadh end. The group appears after profit before tax on the Profit and Loss, and what remains is the profit that closes to Retained Earnings. VAT and TDS collected from others are never part of this group; they are liabilities, not costs. For most private companies the rate is 25 percent. The demo shows Rs 2,08,000 for FY 2083-84: Rs 2,00,000 current and Rs 8,000 deferred.

Income Tax Expense = Current Tax + Deferred Tax; Effective rate = Income Tax Expense / Profit before tax

1. 01Go to Accounts Setup > Chart of Accounts, expand Expenses, then Income Tax Expense.
2. 02Post the year-end charges with Invoicing > Journal Entry to Current Tax and Deferred Tax.
3. 03Open Financial Reports > Profit and Loss Statement and read the group below profit before tax.
4. 04Check the effective rate against 25 percent and explain the gap in the tax note.

Do not post here. The year-end tax Journal Entry uses Current Tax or Deferred Tax.

Income Tax Expense for FY 2083-84 is Rs 2,08,000: current tax Rs 2,00,000 plus deferred tax Rs 8,000.