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Depreciation on new car

M N SHAH (B.Com) (37 Points)

19 September 2013

I have purchased for my Business new car in September 2013 on which i am entitle of 15% depreciation for A/C year 2013-14.

My query is RTO Tax & Municipal Tax is allowable under expense in P & L , like Insurance of the car ? Please advise !

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11 Replies

Rajesh (Service ) (7576 Points)
Replied 19 September 2013

All the taxes, Insurance paid for a vehicle should be capitalized for first time.

1 Like

CA. Kunal Lakhotia (ACA) (1006 Points)
Replied 19 September 2013

ya i agree with Rajesh

1 Like

jigar (Student CA IPC / IPCC) (28 Points)
Replied 19 September 2013

Rajesh @ than what about second time?????

1 Like

NIKHIL MEHTA (Student CA IPC / IPCC) (29 Points)
Replied 19 September 2013

Debit it under profit and loss account

1 Like

Rajesh (Service ) (7576 Points)
Replied 19 September 2013

After first time all the expenses related to Insurance & Taxes should be treated as revenue expenses and debited to P/L account.

jatin aswani (ARTICLE ASSISTANT) (102 Points)
Replied 19 September 2013

First time .....capitalize all expenses & take depreciation on that & After first time.....repairs & insurance will be alowed as expense

1 Like

Nishchay Govil (Student CA Final ) (35 Points)
Replied 20 September 2013

for e.g. if the car has been purchased in January and RTO registration and other expenses like insurance were incurred in Feb or in any other month then will we capitalize them..?

Sunil (Qualified Assistant) (22 Points)
Replied 20 September 2013

yes...the same needs to be capitalize because as per rules u can,t use the vehicle without incurring these onetime registration exp.

Ishant (student) (42 Points)
Replied 20 September 2013

For first time treat insurance and taxes as revenue and afterwards treat all expenses like repairs as debit in P/L ac

CH.Sarath (article assistant) (41 Points)
Replied 25 September 2013

If those are mandatory for payment at the time of purchase or it is One time only at the time of purchase then it should be capitalised

Sachin Jain CA, CS, CWA (Job) (240 Points)
Replied 26 September 2013

Agree to Rajesh...income tax act works on the principle of PUT TO USE. In case of car put to use is possible only afrer incurring initial exp. Like road tax, insurance, any other tax. After wards whatever is the expenditure for insurance etx. Occurs it should be treated as revenue expenditure. Hope it clarifies.