What is provision for deferred income tax?



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I found below line in cash flow statement. what does it mean?

(Benefit) provision for deferred income taxes, continuing operations

2 Answer(s)


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Deferred income taxes occur when there is a difference in depreciation policy used by the tax department and the company. Hence there might be a period in which the company paid less taxes that what it was supposed to. That amount is recorded as deferred income tax which has to be paid later.

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For example a company could have a 5 years depreciation policy while the tax laws might dictate a 4 year depreciation. Hence the companys total expenses and taxable income will be different under these 2 circumstances.