Can company adopt method and rate of dep of income tax act ?

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CA Abhishek Singh (Querist)
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29 September 2013 Hello everyone,

one of my client a pvt ltd co has provided depreciation in the books at the rate prescribed under the income tax act.

so while computing his tax liability there is no difference in depreciation as per books and as per income tax act.

Is this treatment correct ?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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29 September 2013 Dear Abhishek.

A company can claim deprecation at rates different from the minimum prescribed rates under schedule XIV to the Companies Act.

So theoretically you can claim depreciation at the rates prescribed under income tax act.

However, to ensure that there is no difference in depreciation as per income tax and as per company books, you shall have to put all your assets to use only on 1 April of the year or 1 October. Else you would still end up having differences because under income tax we compute depreciation on the basis of less than 180 days/ more than 180 days whereas in companies act we compute depreciation on the basis of actual usage.

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CA Abhishek Singh

CA Abhishek Singh (Querist)
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30 September 2013 Thanks a lot.

CA Abhishek Singh

CA Abhishek Singh (Querist)
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30 September 2013 But i saw schedule XVI and rate on furniture is 14.10 % (WDV) whereas under the income tax act it is 10% (wdv)

so according to me its practically not possible if asset consist of furniture & fixtures since following the rate of depn under the income tax act (10%) would result in charging depn lower than the prescribed in the companies act (14.1%).

whats ur view on this.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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30 September 2013 well as I said, you can claim a depreciation rate higher than companies act. Wherein the rate is lower, it wont be allowed.

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