Provisions for Taxes
Provisions for taxes are liabilities that are recognized when a company has a present obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation.
are typically recorded in the balance sheet as a liability and they are an expense on the income statement.
Contingent liabilities are potential liabilities that may arise from uncertain future events. Contingent liabilities are not recognized in the balance sheet unless it is probable that the liability will occur and the amount of the liability can be reasonably estimated.
If a contingent liability is probable and can be reasonably estimated, it is recorded as a liability on the balance sheet and it is an expense on the income statement.
The balance sheet may contain the following examples of provisions for taxes or other contingent liabilities:
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Income tax provision
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Deferred tax liability
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Warranty liability
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Product liability lawsuit
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Environmental liability
The specific provisions for taxes or other contingent liabilities that are listed on a balance sheet will vary depending on the company and its specific circumstances.
However, all companies are required to disclose all material or other contingent liabilities in the footnotes to their financial statements.
To visit: https://www.incometax.gov.in
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