These represent amounts payable to tax authorities on account of tax on business activity. The tax payable is calculated on the basis of taxable profit which is calculated after adjusting the accounting profit for inadmissible expenses and difference between accounting and tax depreciation.
Every business entity based on its operating region and legal status is/may be subject to advance tax payments and withholding taxes. Advance tax payments are those which a business may be required to pay to tax authority under the law based on quarterly income or profits. Withholding taxes represent amounts deducted by customers, debtors or any other party from the payments being made to the business entity. The tax liability is booked net of any advance tax payments and taxes withheld by customers from receipts of company on behalf of tax authorities.
There may be situations where company may have refundable taxes due to taxable loss during period and/or excess tax payments during the period. In that case, the refundable amount will be shown on the assets side of balance sheet.