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    Question

    Deferred tax asset is ₹5 lakh, expected to reverse in

    2 years. Tax rate is 30%. What is the impact on profit?
    A ₹4 lakh increase Correct Answer Incorrect Answer
    B ₹1.5 lakh increase Correct Answer Incorrect Answer
    C ₹5 lakh increase Correct Answer Incorrect Answer
    D ₹3 lakh increase Correct Answer Incorrect Answer
    E ₹2 lakh increase Correct Answer Incorrect Answer

    Solution

    Deferred Tax Asset is recognized at the amount of future tax saving. On recognition, profit increases by that amount because the tax expense reduces by ₹5 lakh.

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