Please help

the correct entry would be   Bank a/c            Dr.

                                                    to claim a/c

this would be transferred to profit and loss a/c 

in terms of taxability the receipt of claim is not at all an income as per section 2(24) of IT act . 1961 . It is just a compensation in the course of business .

correct entry should be : bank a/c dr         100000

                                                to motor car a/c                  68000

                                                   to profit n loss a/c           32000

acc to me amount should be credited to p&l because if u receive Rs 65000 instead of 100000 from insurance co then u debited the loss of 3000 (68000 -65000) to p&l so excess amount should be transfered to p&l (only if the car belong to firm n not personal)

Hi Pratik,

In this case your profit is 32000. and its liable to pay tax as well. this will not be applicable if your fixed assets block in Vehicle are not exist. because as per it act, this is short term capital gain. and your tax liability would be i think 10 or 20 %

Dear Ratik,

I believe the tax liability will be depends on the gain / loss on transaction for your case. For eg: if the book value was Rs. 68,000 and you received insurance of Rs. 100,000, then you will have to pay Tax on Rs. 32,000 gain. Moreover, you have to write-off the asset from balance sheet. The entry can be:

Cash/Bank A/c Dr        Rs 100,000

      To Gain(Transfer to P&L A/c)       Rs. 32,000

      To Car                                               Rs. 68,000

Regards,

Bahskar

Dear Pratik,

The accounting treatment will be : -

Bank A/c Dr.                                100000

  To Motor Car A/c.                                           68000

  To Profit & Loss A/c.                                      32000.

The profit will taxable as per section 45 (1A) of the income tax act, under the head capital gains.