Corporate Financial Reporting · Income Taxes (Ind AS 12)

Ind AS 12 Current Tax Recognition and Measurement

Updated 11 October 2026 · Fact-checked

Current tax is the income tax payable or recoverable on the taxable profit of a period. Recognise unpaid tax as a liability and any excess paid as an asset. Measure it at the amount expected to be paid or recovered, using rates enacted or substantively enacted by the reporting date.

Understand Current Tax Recognition and Measurement

Current tax is the tax on the taxable profit (tax loss) of the period, as computed under the tax law. It is different from the accounting profit. Accounting profit follows Ind AS. Taxable profit follows the tax law. Current tax starts from the taxable figure, not the book figure.

Recognition is simple. Under Ind AS 12 (para 12), current tax for current and prior periods is recognised as a liability to the extent it is unpaid. If you have already paid more than is due for those periods, the excess is recognised as an asset. So advance tax and TDS are set against the liability. Only the net balance appears.

Measurement is at the amount expected to be paid to (or recovered from) the taxation authorities. You use tax rates and laws that are enacted or substantively enacted by the end of the reporting period (para 46). Substantively enacted means that an announcement by the government has the effect of actual enactment, even though formal enactment may follow after several months (para 48). In that case you use the announced rate. A rate announced or enacted after the reporting date is not used. Its significant effect is disclosed instead (para 88, with Ind AS 10).

Tax losses can create an asset. If a tax loss can be carried back to recover current tax of a previous period, the benefit is recognised as an asset (para 13). It is recognised in the period the loss occurs, because the benefit is probable and can be reliably measured (para 14). Carry-back is only for jurisdictions whose law allows it. Do not confuse this with a carry-forward loss, which gives a deferred tax asset.

Where the tax treatment is uncertain, Appendix C applies. You determine taxable profit, tax bases, unused losses, credits and rates by applying that Appendix, and then recognise and measure current or deferred tax under Ind AS 12.

Key rules to remember

Current tax: Current tax = Taxable profit × Enacted or substantively enacted rate; Taxable profit is computed under the tax law, not taken from the books.
Taxable profit: Taxable profit = Accounting profit ± permanent differences (including exempt income) ± timing differences (originating and reversing) − brought-forward losses set off; Exempt income is one of the permanent differences, so deduct it there and do not deduct it again. Sign convention: add back expenses the tax law disallows permanently. Add a timing difference when the expense is booked earlier than the tax deduction, and deduct it when the tax deduction comes earlier. A reversing timing difference takes the opposite sign to when it originated. Use the tax law, not the books, for every adjustment.
Net current tax balance: Net balance = Current tax for the period − Advance tax and TDS paid; Positive means liability (para 12). Negative means excess paid, shown as an asset.
Rate to use: Rate at reporting date = enacted or substantively enacted (paras 46 and 48); Later changes are not applied. Disclose significant effects.
Carry-back of tax loss: Asset = Tax loss × Rate, limited to tax recoverable for the earlier period; Recognised in the period of loss (paras 13 and 14).

How to solve Current Tax Recognition and Measurement questions

Use this method for any current tax question. Work from the tax law figures, then apply the standard's recognition and measurement rules.

1Start with the accounting profit before tax given in the question.
2Adjust to taxable profit: add back items the tax law disallows, deduct items it exempts or allows in a different amount, and deduct any loss that can be set off.
3Identify the reporting date and find the rate enacted or substantively enacted by then. Ignore later changes, but note them for disclosure.
4Multiply taxable profit by the rate to get current tax for the period.
5Deduct advance tax, TDS and any other payments. A balance owed is a liability. An excess is an asset (para 12).
6If there is a tax loss, check whether the law allows carry-back. If it does, recognise an asset for the tax recoverable. If not, the loss is carried forward and handled under deferred tax.
7Pass the journal entry: Tax expense (P&L) Dr, to Current tax liability (shown net of advance tax and TDS set off). If advance tax and TDS exceed the tax due, show the excess as a current tax asset. Then state any disclosure on later rate changes.

Quickest way: Four-line current tax check

When to use it: Use when a numerical asks for the current tax charge and the closing balance, and time is short.

Write taxable profit in one line: book profit ± tax adjustments.
Apply the rate in force at the reporting date, not a later announced rate.
Subtract advance tax and TDS to get the payable or receivable.
If a loss is carried back, show the recoverable amount as an asset and a credit to tax expense.

Common mistakes in Current Tax Recognition and Measurement

Applying the tax rate to accounting profit instead of taxable profit.
Students treat the book profit as the tax base to save time.
Fix: Always prepare a short reconciliation from book profit to taxable profit first.
Using a rate announced after the reporting date.
The question mentions a new rate and students assume it must be used.
Fix: Use only rates enacted or substantively enacted by the reporting date. Mention the later change as a disclosure under para 88.
Showing advance tax paid as a separate expense or ignoring it.
Students forget that payments reduce the liability.
Fix: Set advance tax and TDS against the current tax. The net balance is a liability, or an asset if there is an excess (para 12).
Treating a carried-forward loss as a current tax asset.
Both involve losses giving future benefit.
Fix: Only a loss that can be carried back to recover earlier current tax gives a current tax asset (para 13). A carry-forward loss falls under deferred tax.
Recognising the carry-back benefit in the year of refund.
Students link recognition with cash receipt.
Fix: Recognise it in the period the loss occurs (para 14).

Worked examples

Example 1

For the year ended 31 March 2027, Sundaram Ltd has accounting profit before tax of ₹80,00,000. It includes penalty of ₹2,00,000 disallowed by tax law and dividend income of ₹5,00,000 exempt from tax. Tax rate enacted at the reporting date is 25%. Advance tax and TDS paid total ₹14,00,000. Compute current tax and the closing balance.

Show the solution

Accounting profit: ₹80,00,000.
Add back penalty: ₹80,00,000 + ₹2,00,000 = ₹82,00,000.
Deduct exempt dividend: ₹82,00,000 − ₹5,00,000 = ₹77,00,000 taxable profit.
Current tax = ₹77,00,000 × 25% = ₹19,25,000.
Less advance tax and TDS ₹14,00,000 = ₹5,25,000 unpaid.
Unpaid current tax is recognised as a liability (para 12).

Answer: Current tax is ₹19,25,000. Current tax liability at year end is ₹5,25,000.

Example 2

Bharat Ltd's reporting date is 31 March 2027. Taxable profit for the year is ₹40,00,000. The rate enacted at that date is 30%. On 15 May 2027, before the financial statements are approved, a new law reduces the rate to 25% for the same year. The new rate had neither been enacted nor announced with the effect of actual enactment by 31 March 2027. Advance tax paid is ₹10,00,000. State the current tax liability and the treatment of the change.

Show the solution

The rate at the reporting date is 30%.
Current tax = ₹40,00,000 × 30% = ₹12,00,000.
Less advance tax ₹10,00,000 = ₹2,00,000 liability.
The 25% rate was neither enacted nor announced with the effect of actual enactment by 31 March 2027, so it is not used in measurement (paras 46 and 48).
Disclose any significant effect of the change on current and deferred tax (para 88, Ind AS 10).

Answer: Current tax is ₹12,00,000 and the liability is ₹2,00,000. The rate change is disclosed, not applied.

Exam tips

Always show the reconciliation from book profit to taxable profit. Marks are given for each adjustment.
Write the reporting date next to the rate you choose. Examiners test whether you ignore later changes.
State the paragraph in plain words, such as unpaid tax is a liability and excess paid is an asset.
In MCQs, check the words carry-back versus carry-forward before choosing a current or deferred tax answer.
For a recommendation or discussion question, mention disclosure of tax-related contingencies from unresolved disputes (para 88).

Practice questions from Income Taxes (Ind AS 12)

Current Tax Recognition and Measurement in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Current Tax Recognition and Measurement: frequently asked questions

What does substantively enacted mean in Ind AS 12?

It covers cases where a government announcement of a tax rate or law has the effect of actual enactment, even though formal enactment comes months later. In that case you use the announced rate (para 48).

Is current tax always a liability?

No. Unpaid current tax is a liability. If the amount paid for current and prior periods exceeds the amount due, the excess is an asset (para 12).

When is a tax loss recognised as a current tax asset?

When the loss can be carried back to recover current tax of an earlier period. The benefit is recognised as an asset in the period the loss occurs (paras 13 and 14).

Which rate do I use if the rate changes after the year end?

Use the rate enacted or substantively enacted by the end of the reporting period. Disclose any significant effect of the later change (para 88).