AS-22 of ICAI on “Accounting for Taxes on Income” deals with the differences in taxable income and accounting income and prescribes treatment of taxes on accrual basis in the same period to which it relate, like in the case of revenue and expenses items. Download PDF Copy of AS-22, from the link below:
Divergence between taxable income and accounting income arises due to two main reasons. Firstly, there are differences between items of revenue and expenses as appearing in the statement of profit and loss and the items which are considered as revenue, expenses or deductions for tax purposes. Secondly, there are differences between the amount in respect of a particular item of revenue or expense as recognised in the statement of profit and loss and the corresponding amount which is recognised for the computation of taxable income.
This Standard should be applied in accounting for taxes on income. This includes the determination of the amount of the expense or saving related to taxes on income in respect of an accounting period and the disclosure of such an amount in the financial statements.
For the purposes of this Standard, taxes on income include all domestic and foreign taxes which are based on taxable income.
This Standard does not specify when, or how, an enterprise should account for taxes that are payable on distribution of dividends and other distributions made by the enterprise.