v3.26.1
Income Tax
 12 Months Ended
Mar. 31, 2026
Income Tax [Abstract]  
INCOME TAX

NOTE 17 – INCOME TAX

 

Jerash Garments, Jerash Embroidery, Chinese Garments, Paramount, Jerash The First, MK Garments, and Kawkab Venus are subject to the regulations of the Income Tax Department in Jordan. Effective January 1, 2019, the Jordanian government reclassified the area where Jerash Garments and its subsidiaries are to a Development Zone. In accordance with the Development Zone law, Jerash Garments and its subsidiaries were subject to income tax at income tax rate of 20% plus a 1% social contribution effective from January 1, 2024. Effective from October 1, 2025, Jerash Garments has been granted tax concession at a corporate income tax rate of 10% plus a 1% social contribution in accordance with the Jordanian Income Tax Law.

 

The foreign earnings of Jerash Garments and its subsidiaries are subject to U.S. taxation at the Jerash Holdings level under the new Global Intangible Low-Taxed Income (“GILTI”) regime.

 

The provision for income taxes consisted of the following:

 

    For the Fiscal Years Ended
March 31,		  
    2026     2025  
Domestic and foreign components of income (loss) before income taxes            
Domestic   $ (2,097,096 )   $ (1,075,059 )
Foreign     6,844,542       1,226,250  
Total   $ 4,747,446     $ 151,191  
    For the Fiscal Years Ended
March 31,		  
    2026     2025  
Provision (benefit) for income taxes            
Current tax:            
U.S. federal   $ (5,594 )   $ 395,067  
U.S. state and local     750       750  
Foreign     1,124,935       436,854  
Total Current Tax     1,120,091       832,671  
Deferred tax:                
U.S. federal     (47 )     158,449  
Total deferred tax     (47 )     158,449  
Total tax   $ 1,120,044     $ 991,120  
                 
Effective tax rates     23.6 %     655.5 %

 

Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 3 – Recent Accounting Pronouncements, the reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the fiscal year ended March 31, 2026 was as follows:

 

   For the Fiscal Year Ended March 31, 2026 
   Amount   Percent 
U.S. Federal Statutory Tax Rate  $996,963    21.0%
State and Local Income Taxes, Net of Federal Income Tax Effect   593    0.0%
Foreign Tax Effects          
Jordan          
Statutory tax rate difference   (67,075)   (1.4)%
Foreign tax attributes   (56,933)   (1.2)%
Valuation allowance   56,933    1.2%
Hong Kong (HK)          
Statutory tax rate difference   (241,315)   (5.1)%
Foreign tax attributes   10,444    0.2%
Valuation allowance   (10,444)   (0.2)%
People’s Republic of China (PRC)          
Statutory tax rate difference   (4,028)   (0.1)%
Foreign tax attributes   81,490    1.7%
Valuation allowance   (81,490)   (1.7)%
Other foreign rate differentials   
—
    0.0%
Effect of Cross-Border Tax Laws          
Global intangible low-taxed income (GILTI)   433,547    9.1%
Subpart F income   323,199    6.8%
Tax Credits          
GILTI-related credits   (259,669)   (5.5)%
Subpart F-related credits   (89,191)   (1.9)%
Other tax credits   
—
    0.0%
Changes in Valuation Allowances   
—
    0.0%
Nontaxable or Nondeductible Items   121,699    2.6%
Changes in Unrecognized Tax Benefits   
—
    0.0%
Other Adjustments   
—
    0.0%
Return to Provision (RTP)   (94,679)   (2.0)%
Effective Tax Rate  $1,120,044    23.6%

The reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the fiscal year ended March 31, 2025 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:

 

   For the
Fiscal Year Ended
March 31,
2025		 
Tax at statutory rate  $31,750 
State tax, net of federal benefit   593 
Non-deductible expenses   (57,723)
Non-taxable income   
—
 
Global Intangible Low-Taxed Income, net   
—
 
Cross-border tax effect - Subpart F income   549,151 
Tax Credits   (52,724)
Foreign tax rate differential   179,343 
Foreign tax attributes   190,817 
Change in Valuation Allowance   (190,817)
Provision to return adjustments   165,440 
Uncertain Tax Provision: Amended tax returns   175,290 
Total  $991,120 

 

Tax payments in terms of jurisdiction consisted of the following:

 

   For the Fiscal Years Ended
March 31,		 
   2026   2025 
Jurisdiction        
U.S. Federal  $562,711   $333,960 
U.S. State and Local   500    500 
Foreign - Jordan   685,510    1,011,997 
Foreign - Others   23,870    52,227 
Total  $1,272,591   $1,398,684 

Unrecognized tax benefits are summarized as follows:

 

    Fiscal
2026		  
Unrecognized tax benefit as of March 31, 2025   $ 175,290  
Less: Tax positions of prior years (Subpart F income inclusion on amended federal tax returns)        
Fiscal Year(s) Affected: FY 2022     (80,048 )
Fiscal Year(s) Affected: FY 2023     (69,981 )
Payments during the year     (25,261 )
Unrecognized tax benefit as of March 31, 2026   $ 0  

 

All unrecognized tax provision had been paid as of March 31, 2026.

 

The Company’s deferred tax assets and liabilities as of March 31, 2026 and 2025 consisted of the following:

 

Deferred tax liabilities  As of
March 31,
2026		   As of
March 31,
2025		 
Deferred tax liabilities  $(73)  $(120)
Net operating losses carried forward   1,940,213    1,975,215 
Less: valuation allowance   (1,940,213)   (1,975,215)
Deferred tax liabilities  $(73)  $(120)

 

Deferred tax assets are reduced by a valuation allowance when it is considered more likely than not that some portion or all of the deferred tax assets will not be realized. As of March 31, 2026 and 2025, the allowance for deferred tax assets was $1,940,213 and $1,975,215, respectively. The allowance is provided for net operating loss of foreign subsidiaries.

 

As of March 31, 2026, the Company had cumulative book-tax basis differences in its foreign subsidiaries of approximately $18.5 million. The Company has not recorded a U.S. deferred tax liability for the book-tax basis in its foreign subsidiaries as these amounts continue to be indefinitely reinvested in foreign operations. The reversal of this temporary difference would occur upon the sale or liquidation of the Company’s foreign subsidiaries, and the estimated impact of the reversal of this temporary difference is approximately $3.9 million. As of March 31, 2026 and 2025, there were $nil and $175,290 and uncertain tax positions, respectively.

 

The One Big Beautiful Bill Act was enacted during the period. The Company has evaluated the provisions of the legislation and recorded the effects of changes in tax law in accordance with ASC 740. The impact primarily relates to remeasurement of deferred tax assets and liabilities at the enacted tax rates, as well as adjustments to current tax expense where applicable.

 

The Company files income tax returns in the U.S. federal, state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to April 1, 2019.