DEPRECIATION AS PER INCOME TAX OR AS PER ACCOUNTING

SUPPOSE MR. X IS NOT CHARGING DEPRECIATION ON THEIR BOOKS OF ACCOUNTS BUT THEY WERE CHARGING DEPRECIATON AS PER INCOME TAX ACT FOR LAST TWO YEARS BUT NOW MR. X WANTS TO CHARGE DEPRECIATION ON THEIR BOOKS OF ACCOUNTS 

Q1)  WHETHER DEP. NEEDS TO BE CHARGE ON WDV OR BOOK VALUE

Q2)  MISMATCH BETWEEN UNABSORBED DEP. AS PER INCOME TAX AND BOOKS.

Replies (2)
Quick Summary
This discussion clarifies how to handle depreciation when accounting practices differ from income tax requirements. It addresses whether to charge depreciation on the written-down value (WDV) or book value, and how to manage discrepancies between unabsorbed depreciation for tax purposes and your company's books. The advice suggests charging depreciation on a WDV basis in the books, aligning with income tax rules, and transferring any opening balance mismatch to the capital account, in accordance with both the Companies Act 2013 and the Income Tax Act 1961.

Charge dep. in books on WDV basis as per income tax.
The balance of opening mismatch should be transferred to capital account.
It's as per companies act 2013 and as per income tax act 1961.
Both calculations are required.
Depreciation is an allowable expenditure under the Income tax act 1961 and hence it is possible.

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