Capital Subsidy Adjustment in Fixed Assets

Sir,request you to kindly guide on how to adjust Capital Subsidy received in March 2019 in Fixed Assets  :-

Option 1 : To reduced Opening WDV with subsidy and then calculate depreciation on Reduced WDV or

Option 2 : To Calculate Depreciation first on Opening WDV and then reduce Subsidy amount .

Replies (2)
Quick Summary
This discussion addresses how to correctly adjust capital subsidies received for fixed assets. It clarifies the debate between reducing the opening WDV before or after depreciation calculation, recommending the latter approach. The advice also touches upon how to handle subsidies for new assets and those received in subsequent years, including implications for deferred tax computations.

Option 2 is correct

If this is brand new asset reduce asset by subsidy amount and, it is different in deferred tax computations and you can  to do it either ways because you need temporary taxable difference to apply corporate tax. If a subsidy was given in the subsequent years, then reduce it the from current depreciation.

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