Accounting and Tax Treatment

I have the following problem:- An individual concern has two assets under 15% Dep. rate category. A scooter with WDV of Rs. 1500 and a moped with WDV of Rs. 500. Now the moped is sold during the year for Rs. 800. For tax purpose, dep. will now be provided on Rs. 1200 @ 15%. But how we will show this in our books of accounts and IT Return. The proprietor has charged dep. on WDV of scooter is Rs. 1500 and recorded profit of Rs. 300 on the sale of moped. Pls guide me.
Replies (6)
Originally posted by :Naina
" I have the following problem:-

An individual concern has two assets under 15% Dep. rate category. A scooter with WDV of Rs. 1500 and a moped with WDV of Rs. 500. Now the moped is sold during the year for Rs. 800. For tax purpose, dep. will now be provided on Rs. 1200 @ 15%. But how we will show this in our books of accounts and IT Return. The proprietor has charged dep. on WDV of scooter is Rs. 1500 and recorded profit of Rs. 300 on the sale of moped.

Pls guide me.
"

 

You can compute depreciation as per income tax rule for compution purpose and also compute depreciation as per regular method for book of accounts

So the profit will differ for both of these.

The profit figure on sale of assets will differ between Tax and accounting purposes. So wats the deal.

As per Books, you provide depreciation and account profit with regard to individual assets.

But when it comes to IT, depreciation will be provided on block concept. If there is a gain, that will be short term capital gains. Dont interchange the figures with the methods. Account them as required under relevant laws.

ya shenoy is right

Concept of charging depreciation differ between accounting and tax purposes. In accounting depreciation is charged asset wise as it is charged by prop. but in tax the depreciation is charged block wise.

Block

Scooter                             1500

Moped                                  500

Total                                2000

After sale of moped at Rs. 800 the block is reducedto Rs. 1200 and now the depreciation will be charged on rs. 1200 @ 15%

On sale of Moped Dep will be charges proportionately. Say the moped is sold on 31.12.000. Then dep in accounts will be charged for 9 month. Profit = Sale Proceeds - WDV in accounts wiil be recognised. It is totally diferent from Treatement undeer income tax.

 

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