I have purchased for my Business new car in September 2013 on which i am entitle of 15% depreciation for A/C year 2013-14.
My query is RTO Tax & Municipal Tax is allowable under expense in P & L , like Insurance of the car ? Please advise !
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Depreciation on new car
Replies (11)
All the taxes, Insurance paid for a vehicle should be capitalized for first time.
ya i agree with Rajesh
Rajesh @ than what about second time?????
Debit it under profit and loss account
After first time all the expenses related to Insurance & Taxes should be treated as revenue expenses and debited to P/L account.
First time .....capitalize all expenses & take depreciation on that &
After first time.....repairs & insurance will be alowed as expense
for e.g. if the car has been purchased in January and RTO registration and other expenses like insurance were incurred in Feb or in any other month then will we capitalize them..?
yes...the same needs to be capitalize because as per rules u can,t use the vehicle without incurring these onetime registration exp.
For first time treat insurance and taxes as revenue and afterwards treat all expenses like repairs as debit in P/L ac
If those are mandatory for payment at the time of purchase or it is One time only at the time of purchase then it should be capitalised
Agree to Rajesh...income tax act works on the principle of PUT TO USE. In case of car put to use is possible only afrer incurring initial exp. Like road tax, insurance, any other tax. After wards whatever is the expenditure for insurance etx. Occurs it should be treated as revenue expenditure. Hope it clarifies.
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