An Ind AS reporter offsets current tax assets and current tax liabilities only if it has a legally enforceable right to set off the recognised amounts and intends net settlement or simultaneous realisation and settlement. Common ownership, the same bank account or a preferred net exposure figure does not establish both conditions.
Scope and recognition before netting
This guide uses Ind AS 12 in ICAI’s current 2025–26 compendium, particularly paragraphs 12, 46 and 71–73, checked on 25 October 2026, for FY 2025–26 presentation models. Recognise and measure the actual current-tax balances first. Paragraph 12 addresses unpaid tax and excess amounts already paid; paragraph 46 uses amounts expected to be paid/recovered under enacted or substantively enacted law at reporting date. Offsetting cannot turn an unrecognised or unsupported refund claim into a valid asset.
Both tests are necessary
Paragraph 71 requires both an enforceable set-off right and the specified settlement intention. Paragraph 72 explains the usual same-tax-authority setting where tax laws permit one net payment. Same authority alone is not a substitute for permission under applicable law. Document the actual tax debtor/creditor, period, balance, enforceability and settlement method rather than attaching a generic group policy to every tax ledger.
Consolidation does not merge taxpayers
Under paragraph 73, an asset of one group entity can be offset against another’s liability in consolidated statements only when the entities have the legally enforceable right to a single net payment and the stated net/simultaneous settlement intention. Do not presume an Indian group has tax consolidation merely because it prepares consolidated accounts. A treasury transfer between subsidiaries does not itself create a statutory right against the taxation authority.
Keep current and deferred tax distinct
Paragraphs 74–76 contain a separate deferred-tax offset framework. Do not net a current refund against a deferred liability merely because both are tax balances. This article does not recalculate deferred-tax recognition, reversals or MAT credits. Net balance-sheet presentation also does not make tax expense equal cash paid: keep profit-or-loss, equity/OCI tax where applicable, payments and recognised balances in separate bridges.
Evidence and examples
Every legal right and settlement intention in the examples is an independently established assumption, not a conclusion about a real jurisdiction. All current-tax balances are assumed validly recognised and measured. Figures are closing amounts, not tax-base or rate computations, and no additional cess or surcharge is added. Preserve gross ledgers even where net presentation is required; they support tax-credit reconciliation and later settlement. Where only part of a population satisfies the conditions, map that part precisely rather than netting every balance against it.
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Both current-tax conditions satisfied
Recognised current-tax asset ₹3,00,000 and liability ₹8,00,000 fall within an established enforceable right and intended net settlement. Net current-tax liability is ₹5,00,000, while gross ledger support remains ₹3,00,000 and ₹8,00,000.
Illustrative example 2: Right without the required intention
The same ₹3,00,000 asset and ₹8,00,000 liability have an established right, but no intended net or simultaneous settlement. Present asset ₹3,00,000 and liability ₹8,00,000 separately; the arithmetic difference ₹5,00,000 is not enough.
Illustrative example 3: Group entities without a shared legal right
Subsidiary A has current-tax asset ₹4,00,000 and B liability ₹7,00,000. No enforceable right to a single net payment exists. Consolidated presentation retains those separate amounts; common ownership does not justify only a ₹3,00,000 liability.
Illustrative example 4: Different authorities without a set-off right
A valid refund ₹2,00,000 from authority X and payable ₹6,00,000 to Y lack the relevant enforceable set-off right. Keep asset ₹2,00,000 and liability ₹6,00,000 separate rather than showing only ₹4,00,000 payable.
Illustrative example 5: Limit netting to supported balances
Within one mapped population, asset ₹2,00,000 and liability ₹5,00,000 satisfy both conditions, yielding net liability ₹3,00,000. A separate ₹1,00,000 asset outside that right remains separately presented; total assets shown ₹1,00,000 and tax liabilities ₹3,00,000, not a single ₹2,00,000 liability.
Illustrative example 6: Do not combine current with deferred
Recognised current-tax asset ₹2,50,000 and deferred-tax liability ₹9,00,000 are different categories. This current-tax rule does not permit their arithmetic ₹6,50,000 to replace the separate balances. Deferred-tax offsetting needs its own relevant asset/liability population and tests.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm reporting scope | Ind AS applicability and current-tax population. |
| 2 | Validate recognised amounts | Tax workings, credits and recoverability support. |
| 3 | Identify taxable persons | Entity-wise tax debtor and creditor mapping. |
| 4 | Identify authorities and periods | Jurisdictions, years and actual balances. |
| 5 | Establish legal right | Specific applicable-law set-off analysis. |
| 6 | Evidence settlement intention | Net or simultaneous recovery/payment plan. |
| 7 | Test consolidated cross-entity cases | Paragraph 73 single-net-payment right and intention. |
| 8 | Separate deferred-tax balances | Independent paragraph 74–76 working where relevant. |
| 9 | Map partial eligible populations | Gross and net amounts without unrelated offsetting. |
| 10 | Reconcile statements and ledgers | Presentation, tax expense, payments and closing support. |
Sixteen practitioner FAQs
1. Are recognised current-tax balances automatically netted?
No. Both paragraph 71 conditions must be satisfied.
2. Is the same authority sufficient alone?
No. Establish the enforceable right and settlement intention.
3. Does common ownership create a tax set-off right?
No. Check the actual law and taxpayer population.
4. Can consolidated statements net subsidiaries freely?
No. Paragraph 73 has specific conditions.
5. Does a treasury transfer establish a right against the tax authority?
Not by itself.
6. What settlement intention is relevant?
Net settlement or simultaneous realisation and settlement.
7. Can management’s preferred exposure figure replace that evidence?
No. Document the actual conditions.
8. Should gross ledger balances be deleted after net presentation?
No. Preserve the supporting ledgers and reconciliation.
9. Can an unsupported refund be recognised through netting?
No. Recognition and measurement come first.
10. Does paragraph 72 establish a universal Indian tax-group regime?
No. It explains the conditions, not a jurisdiction-independent legal right.
11. Can different authorities’ balances be netted without a right?
No. An arithmetic difference is insufficient.
12. What if only part qualifies?
Map and net the eligible population while separately presenting other balances.
13. Can a current-tax asset be offset against deferred-tax liability here?
No. The current-tax test is not a cross-category offset permission.
14. Are deferred-tax rules identical?
They have their own paragraph 74–76 conditions.
15. Does net balance-sheet tax equal the tax expense?
Not necessarily. Expense and payment/presentation bridges are separate.
16. What is the core evidence file?
Recognised balances, applicable legal right, settlement intention and entity/authority mapping.
Conclusion
Current tax assets and liabilities may be offset only when Ind AS 12’s legal-right and settlement-intention conditions are satisfied. A consolidated group or the same tax authority alone does not establish the required right.