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Depreciation under income tax act & company act


Dear All

Pl explain that while preparing Final A/c , we consider the depreciation rate as per income tax act , & at the time of assessment , IT DEptt consider the same  then what is the use of depreciation under company act .

 

 

PL reply , it is very urgent

 

Thannks

 

Brajesh

 
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Chartered Accountant


Dear Sir, While preparing final a/c, depriciation is calculated as pe companies act only.........

Schedule XIV of companies act prescribes minimum rates of depr..................So, the rates below dat are not considered to present ture & fair view.............however, rates as per income tax act may be used in final a/c too provided they are higher than the rates specified in schedule XIV.


Total thanks : 1 times

 
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There are many provisions in The Companies Act which are based upon the net profit calculated as per Schedule VI. For example Dividend has to be declared on the basis of NP computed as per the Schedule VI.

That's why we have to provide depreciation as per Schedule VI

 
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Originally posted by : CA Sumit Grover

Dear Sir, While preparing final a/c, depriciation is calculated as pe companies act only.........

Schedule XIV of companies act prescribes minimum rates of depr..................So, the rates below dat are not considered to present ture & fair view.............however, rates as per income tax act may be used in final a/c too provided they are higher than the rates specified in schedule XIV.

 
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Dear All

 

suppose -  we use 13.91% rate of Depr on machine  as per the company tax act  while making final a/c ,then,  will this be changed as 15 % at the time of assessment that is as per the income tax act

 

m i correct , pl reply

 
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well, one thing should be distinctly understood.

1.    The depreciation for the purpose of Income tax is to be computed as per income tax Act only, thus    

whether the taxable entity is company or not, it is to be followed.

2. The depreciation for the purpose of company is to be applied as per SCH VI which stipulates rate as minimum rate of depn. So companies are at freedom to charge higher rate of deprn provided it gives a true and fair view.

thus for income tax 15 p.c. will be considered irrespective of rate as per sch VI


Total thanks : 1 times

 
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Hi brijesh One advise to you. Don't mix depreciation of companies act with depreciation as per income tax act. While preparing final accounts use rates of companies act. And for preparing income tax return and assement income tax rates are to be taken. Regarding difference in depreciation due due diffent rates this will taken care by AS 22

 
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My dear,

Depreciation under companies act is to arrive at distributable profits, and to show true and fair profit / loss in the period of audit and  the dep at the  minimum rates prescribed under sch-XIV must be charged for declaring any dividend.

where as dep rates as per IT act is normally higher than the companies act is to give relief in tax to the assessee,  to provide them to replace the machinery / asets at an early peiod, and to cope with technological upgradation.

hope this will clarify your doubt.

 
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Chartered Accountant


Dear Freind At the time of prepration of final account we take depreciation as per as per companies act only, 

 
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Accounts Manager


The use of  Depreciation under Income tax is to derive the Deffered Tax Liabilityor Asset . The difference between Companies Act Vs Income tax lead to consider Deffered Tax

 
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