Tax calculation in financial statements involves determining the income tax expense or benefit for a reporting period based on applicable tax laws and regulations. The process typically involves several steps:
Determine Taxable Income: Start by calculating the taxable income for the period. This involves adjusting the financial statement income by applying tax rules and regulations, including deductions, exemptions, and tax credits.
Apply Tax Rates: Once the taxable income is determined, apply the applicable tax rates to calculate the income tax liability. Tax rates may vary based on the jurisdiction and the nature of the entity (e.g., corporate tax rates vs. individual tax rates).
Consider Temporary Differences: Temporary differences arise when there are differences between the financial statement treatment of certain items and their tax treatment. These differences can be either taxable or deductible in future periods. They require the calculation of deferred tax assets and liabilities, which represent the future tax impact of these temporary differences.
Calculate Deferred Tax: Calculate deferred tax assets and liabilities by applying the appropriate tax rate to the temporary differences. Deferred tax assets arise when temporary differences will result in tax benefits in the future, while deferred tax liabilities arise when temporary differences will result in higher taxes in the future.
Recognize Tax Expense or Benefit: The tax expense or benefit is recognized in the financial statements based on the calculated income tax liability, as well as any changes in deferred tax assets and liabilities.
Disclose Tax-related Information: The financial statements should provide relevant disclosures regarding the income tax expense or benefit, deferred taxes, tax contingencies, and any other significant tax-related information.
It's important to note that tax calculation and reporting can be complex and subject to specific accounting standards and tax regulations in each jurisdiction. Therefore, seeking professional advice from tax experts and complying with applicable tax laws and regulations is essential to ensure accurate tax calculations in financial statements.
Wimax Company limited
Current Tax calculation…
Year-2022 Year-2021
Net profit before tax xxxx xxxx
Deduct income for separate consideration:-
Less: Dividend income xxxx xxxx
Less: Interest on FDR xxxx xxxx
Adjusted net profit before tax xxxx xxxx
Add: Depreciation as per FS xxxx xxxx
Less: depreciation as per 3rd schedule (xxxx) xxxx
Adjusted Business income xxxx xxxx
Entertainment expense as per Accounts (if any) - -
Profit after add back of Entertainment expense xxxx xxxx
Add: Entertainment as per Accounts (if any) - -
Profit after add back of Entertainment xxxx xxxx
Less: Allowable Entertainment expense:
On ist 10,00,000@4% - -
On rest @2% - -
Total Entertainment expense as per tax rule - -
Actual Entertainment expense - -
Lower of Allowable and Actual expense - -
Total Business income xxxx xxxx
Tax on Total Business income:
Business income@15% TK. xxxx xxxx xxxx
Interest Income @ 15@ TK. Xxxx xxxx xxxx
(A) Regular tax on business income xxxx xxxx
(B) Minimum Tax xxxx xxxx
Gross receipts:
Revenue xxxx xxxx
Others income xxxx xxxx
Total Income xxxx xxxx
(C) Turnover Tax@.30% xxxx xxxx
Tax payable higher of A, B, & C xxxx xxxx
Tax on dividend Tax 20% on BDT xxxx xxxx
Current year Tax provision xxxx xxxx