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The overall tax is the total of current tax rates and the deferred tax charged or credited in the profit and loss statement for the duration. The deferred tax liability is created when there is a temporary difference between the actual income tax and the book tax. It is a liability which represents the increase in taxes.
There are many different types of transactions that can create a temporary difference between the pre-tax book income and the taxable income – which creates deferred tax assets or liabilities.
The monthly tax calculation takes into account the taxable pay and the tax paid year to date, whereas the cumulative tax code refers to any overpayment or underpayment, which can be corrected in real-time or at the time of calculation of the payroll.
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