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Depreciation under income tax act & company act

Brajesh gautam (student) (232 Points)

27 October 2011  

Dear All

Pl explain that while preparing Final A/c , we consider the depreciation rate as per income tax act , & at the time of assessment , IT DEptt consider the same  then what is the use of depreciation under company act .

 

 

PL reply , it is very urgent

 

Thannks

 

Brajesh


 16 Replies

Sumit Grover (Chartered Accountant ) (3647 Points)
Replied 27 October 2011

Dear Sir, While preparing final a/c, depriciation is calculated as pe companies act only.........

Schedule XIV of companies act prescribes minimum rates of depr..................So, the rates below dat are not considered to present ture & fair view.............however, rates as per income tax act may be used in final a/c too provided they are higher than the rates specified in schedule XIV.

1 Like

AVTAR SINGH (Expert) (1873 Points)
Replied 27 October 2011

There are many provisions in The Companies Act which are based upon the net profit calculated as per Schedule VI. For example Dividend has to be declared on the basis of NP computed as per the Schedule VI.

That's why we have to provide depreciation as per Schedule VI

Nabeel (CA) (3288 Points)
Replied 27 October 2011

Originally posted by : CA Sumit Grover

Dear Sir, While preparing final a/c, depriciation is calculated as pe companies act only.........

Schedule XIV of companies act prescribes minimum rates of depr..................So, the rates below dat are not considered to present ture & fair view.............however, rates as per income tax act may be used in final a/c too provided they are higher than the rates specified in schedule XIV.

Brajesh gautam (student) (232 Points)
Replied 27 October 2011

Dear All

 

suppose -  we use 13.91% rate of Depr on machine  as per the company tax act  while making final a/c ,then,  will this be changed as 15 % at the time of assessment that is as per the income tax act

 

m i correct , pl reply

Sunil Singh Thakur (AAO) (295 Points)
Replied 27 October 2011

well, one thing should be distinctly understood.

1.    The depreciation for the purpose of Income tax is to be computed as per income tax Act only, thus    

whether the taxable entity is company or not, it is to be followed.

2. The depreciation for the purpose of company is to be applied as per SCH VI which stipulates rate as minimum rate of depn. So companies are at freedom to charge higher rate of deprn provided it gives a true and fair view.

thus for income tax 15 p.c. will be considered irrespective of rate as per sch VI

1 Like

CA PARTH SHAH (In Practice) (1861 Points)
Replied 28 October 2011

Hi brijesh One advise to you. Don't mix depreciation of companies act with depreciation as per income tax act. While preparing final accounts use rates of companies act. And for preparing income tax return and assement income tax rates are to be taken. Regarding difference in depreciation due due diffent rates this will taken care by AS 22

Suru Venkateswarlu (CA Practice ) (59 Points)
Replied 28 October 2011

My dear,

Depreciation under companies act is to arrive at distributable profits, and to show true and fair profit / loss in the period of audit and  the dep at the  minimum rates prescribed under sch-XIV must be charged for declaring any dividend.

where as dep rates as per IT act is normally higher than the companies act is to give relief in tax to the assessee,  to provide them to replace the machinery / asets at an early peiod, and to cope with technological upgradation.

hope this will clarify your doubt.

CA Ashish Singh (Chartered Accountant) (23 Points)
Replied 29 October 2011

Dear Freind At the time of prepration of final account we take depreciation as per as per companies act only, 

V P Narasimhan (Accounts Manager) (784 Points)
Replied 05 November 2011

The use of  Depreciation under Income tax is to derive the Deffered Tax Liabilityor Asset . The difference between Companies Act Vs Income tax lead to consider Deffered Tax

CA ADITYA JAIN (CA, MBA.CS, B.COM) (115 Points)
Replied 06 January 2012

difference between dep. as per company act and as per it act is deffered tax assets/liabilities...

 

1 Like

Mamai Dutta (Professional) (21 Points)
Replied 05 March 2012

Dear Sir,

Please forward me the details of depreciation under income tax act % company act for calculation of deferred tax liability/assets.

Thanks & regard,

Mamai Dutta.

CA Alkit jain (Owner of CA ROCKSTARS facebook page )   (94 Points)
Replied 23 April 2012

if we are applying income tax rates in making financial statement as per shedule vi then should we also apply rule of 180 days as in it act 
or we calculate it on days basis as per co. act

Ramesha.M (Accountant) (800 Points)
Replied 27 September 2012

Dear sir,

 

can you tell me individual proprietorship firms has made depreciation in the books of accounts according to companies Act or inome tax act 

 

Regards

Ramesha.m

sarath (CA) (82 Points)
Replied 23 November 2013

Dear Friend,

For companies established in India, they have to prepare Financials as per Schdule VI of Income tax Act,1961 (Now Revised Schdule VI is applicable). So for the Financials we have to Take Depreciation rates as per Companies Act.

For Income tax Calculation, which you are calculating as per Income tax act, the rates of Companies act are not applicable , You need to consider the rates as specified under income tax act

source: https://www.exploreincometax.com/Income-tax-Ready-Reckoners/depreciation-as-per-income-tax-act-1961


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