NBFC Capital Treatment for Deferred Tax Assets and Liabilities

Live · in forceNo withdrawal recorded as of 20 Jun 2026. Reviewed by Vikram Jain; always verify against the official RBI source below.

Issued by RBI: 09 Jun 2009 · Decoded by BankPulse: 20 Jun 2026, 20:04 IST

⏱ ~2 min read

Quick answerRBI clarifies that NBFCs must deduct deferred tax assets (DTA) from Tier I capital, net of deferred tax liabilities (DTL), except DTA from accumulated losses which is fully deducted. DTL cannot be added to capital.

What changed

This circular builds on the July 31, 2008 instruction by providing detailed computation rules for DTA and DTL in capital adequacy. It specifies that DTA net of DTL (excluding DTA from accumulated losses) must be deducted from Tier I capital, while any excess DTL cannot be used to offset DTA from losses or added to capital.

What it means for you

NBFCs must carefully segregate DTA into those from accumulated losses and others, and compute net DTA after adjusting for DTL. This ensures capital adequacy calculations reflect only tangible, realizable assets, tightening the quality of Tier I capital. Lenders need to update their capital computation models and reporting systems accordingly.

What you must do

Reclassify DTA and DTL in balance sheet under 'Other Assets' and 'Other Liabilities and Provisions' respectively.
Deduct intangible assets and current/brought-forward losses from Tier I capital.
Calculate DTA deduction: deduct DTA from accumulated losses fully, plus net of other DTA minus DTL.
Ensure any excess DTL over other DTA is neither adjusted against DTA from losses nor added to Tier I capital.
Update internal capital adequacy policies and reporting templates to comply with these rules.

Who it affects

All NBFCs, NBFC compliance and finance teams, Auditors reviewing NBFC capital adequacy

How should DTA and DTL be presented in the balance sheet?

DTL created by debit to revenue reserves or P&L should be under 'Other Liabilities and Provisions' as 'others'. DTA created by credit to revenue reserves or P&L should be under 'Other Assets' as 'others'.

What is the exact formula for DTA deduction from Tier I capital?

Deduct (i) DTA associated with accumulated losses, plus (ii) other DTA net of DTL. If DTL exceeds other DTA, the excess is neither adjusted against (i) nor added to Tier I capital.

Can DTL ever be included in Tier I or Tier II capital?

No. DTL is not eligible for inclusion in either Tier I or Tier II capital for capital adequacy purposes, as per the earlier circular and this clarification.

AI-drafted · 3-model AI consensus fact-check · under the editorial review of Vikram Jain · decoded & published by BankPulse · 20 Jun 2026, 20:04 IST

Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=5025&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by Vikram Jain. Independent platform, not affiliated with the Reserve Bank of India; never reproduces RBI text verbatim.