Wednesday, January 15, 2014

Deferred Tax Liability on Special Reserve created under Section 36(1) (viii) of the Income Tax Act, 1961

The Reserve Bank of India (RBI) has held as a matter of prudence, Deferred Tax Liability (DTL) should be created on Special Reserve.

For this purpose,


  • If the expenditure due to the creation of DTL on Special Reserve as at March 31, 2013 has not been fully charged to the Profit and Loss account, banks may adjust the same directly from Reserves. The amount so adjusted may be appropriately disclosed in the Notes to Accounts of the financial statements for the financial year 2013-14.
  • DTL for amounts transferred to Special Reserve from the year ending March 31, 2014 onwards should be charged to the Profit and Loss Account of that year.

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