depreciation diff

HI;

 

WHY THERE IS A DIFFERENCE IN FINANCIAL BOOK DEPRECIATION AND INCOME TAX RETURN,

A LIFE OF MACHINARY IS 10 YEARS AND SCRAP VALUE IS 50,000.00 PURCHASE VALUE 8,00,000.00 AS ON 01.01.2005

 

THEREFORE, I HAVE CALCULATED DEPRECIATION FOR MACHINARY AS:

750, 0000/10 = 75,000.00 P.A ($ 6,250.00 P.M)

BUT AS PER 2008 RETURN FILE THE DEPRECIATION AMOUNT OF MACHINARY IS ONLY 53,500.00 FOR 2008

 

CAN ANYONE PLEASE EXPLAIN AND HELP ME ON THIS?

ALSO, WHICH AMOUNT OF DEPRECIATION I SHOULD SHOW IN MY BOOKS OF ACCOUNTS?

Replies (4)

 In Income tax, The rates of depreciation are different from other acts. 

In Income Tax dep. is provided as per block. The rate of Dep on Plant  is 15 %.

Further Income tax doesn't consider the scrap value.

Dep. is provided on full amt.

when machine is sold then sale value is reduced from block of assets

There are lots of method for charging depreciation........................Income tax has its own method of charging depreciation and companies act has its own method of charging depreciation.

So there are 100% of chances that there will be differences of Depreciation between financial books and As per Income tax

 
"

can you please tell me the treatment of depreciation in case of impairment of assets as per income tax act








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HI;
 
WHY THERE IS A DIFFERENCE IN FINANCIAL BOOK DEPRECIATION AND INCOME TAX RETURN,
A LIFE OF MACHINARY IS 10 YEARS AND SCRAP VALUE IS 50,000.00 PURCHASE VALUE 8,00,000.00 AS ON 01.01.2005
 
THEREFORE, I HAVE CALCULATED DEPRECIATION FOR MACHINARY AS:
750, 0000/10 = 75,000.00 P.A ($ 6,250.00 P.M)
BUT AS PER 2008 RETURN FILE THE DEPRECIATION AMOUNT OF MACHINARY IS ONLY 53,500.00 FOR 2008
 
CAN ANYONE PLEASE EXPLAIN AND HELP ME ON THIS?
ALSO, WHICH AMOUNT OF DEPRECIATION I SHOULD SHOW IN MY BOOKS OF ACCOUNTS?
 

"


 

 The method of calculation of dep. in Income tax is different from account..

In Income tax dep. is calculated on the basis of block of assets. it does not consider scrap value.

first of all Machinery comes into its respective block say 15 %. then dep. is allowed on that.

if machine is put to use for less than 180 days then in this case half dep. will be allowed.

Like in ur example   machinery is purchased on 1.1.2005, then dep will be allowed half that is Rs. 60000 in year 2004-05.

In year 2005-06 - Rs. 111000 (800000-60000)*15% and so on.

on balance value dep @ 15 % will be provided next year.

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