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Capitalisation and Depreciation

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Jayanta Bandyopadhyay

413 Points Posted on 11 September 2025

We have capitalised on 20 March 2025, which includes Govt's grant in aid. and the same is put to use. Commencement of commercial production is declared as 20 March

Accounting year ends on 31 March 2025.

Can we avoid depreciation during FY 2024-25

Additionally, if Grant amount is reduced from assets basket- what is the impact on deprection and tax audit.

Alternatively, if we create deferred liability and amortise Grant over 10 years- hat is the impact on deprection and tax audit.

Kindly suggest the best course of action.

Regards,

Replies (1)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9615 Points Posted on 12 September 2025

you can depreciation for FY 2024-25 wold typically be calculated for the period the asset was used for business from 20 March to 31 March.

Impact of Reducing Grant from Assets Basket: Depreciation: If the grant amount is reduced from the asset's cost ( as per AS 12/Ind AS 20), depreciation would be calculated on the net cot (cost of asset minus grant).

Tax Audit: Ensure compliance with tax laws.

Creating Deferred Liability and Amortizing Grant over 10 years:

Depreciation: Depreciation would be on the full cost of the asset. The grant amortization (over 10 years as income) does not directly impact depreciation calculation.