Prepaid expenses for housing project

You can take the whole of the amount of Rs.22lacs as an asset in your business.

you can show it in your business by way of capital contribution by posting the below entry.

Building A/c Dr  22lcas

to- Capital A/c  22lacs

Consider this also for tax purpose

The cost of acquisation will not be 22 lacs for tax purposes

Cost of land and building should be seggregated for the purpose of depriciation (as depriciation is only allowed on building) and the Cost of building will be reduced by the notional depriciation as if it was in use in business.

Say for eg. cost of land (inclusive of all taxes stamp value etc.) is 10,00,000 and construction of building  (10,00,000 + other charges)

The notional depriciation will be charged till the year the asset is bought into business (afterwards depriciation on WDV will be allowed)

sec 43(1) explanation no.5

Where a building previously the property of the assessee is brought into use for the purpose of the business or profession after the 28th day of February, 1946,the actual cost to the assessee shall be the actual cost of the building to the assessee, as reduced by an amount equal to the depreciation calculated at the rate in force on that date that would have been allowable had the building been used for the aforesaid purposes since the date of its acquisition by the assessee.