Provisions

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Divya sharma (Querist)
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17 April 2012 Expense related provisions are allowed under income tax act ?? which are made during closing of financial year like for telephone etc

and if allowed provision created for 100/ and bill received for 125. than 25 will be prior period next year...

and if dis allowed than how to do accounting for the expenses of which bill received late ??

kindly clarifiy this...

CA Navin Jain

CA Navin Jain (Expert)
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17 April 2012 dabit to prior period expences

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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17 April 2012 Dear Divya,

Provision for expense is allowed under income tax in the year of provision and the difference in actual and provision will be allowed in the next year.

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CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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17 April 2012 In the next year,
the difference amount will not be considered as prior period expense since the difference has not arisen due to error or omission. it is change in estimate and will be allowed as expenditure in next year.

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Divya sharma

Divya sharma (Querist)
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17 April 2012 thanx amit sir ji

CA Navin Jain

CA Navin Jain (Expert)
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17 April 2012 but as per income tax act expenses will be disallowed.

Divya sharma

Divya sharma (Querist)
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17 April 2012 SO WHAT SHOULD WE DONE FOR EXPENSES WHOSE BILL RECEIVED LATE... GENERALLY BILL FOR EVERY TRANSACTION OF MARCH IS RECEIVED IN APRIL

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CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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17 April 2012 As per income tax also, the exepnses will be allowed but in case of exepnses liable for TDS are allowed only if TDS is deducted.

Provision for expenses are allowed if it is made on reasonable basis and with proper estimation. In the next year, you can claim the difference amount as an expense.
Only, prior period expenses are disallowed under income tax. Difference will be allowed in the neaxt year.

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