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Tax treatment of Depreciation of ROU assets and lease liability financial expenses

Others 1860 views 2 replies
respected sir

I have one query.

My one of the client follow IND AS 116, they created ROU assets and lease liability.
the depreciation of ROU assets charge to P&L account and Finance expenses (interest) on Lease liability also charged to P&L.

How I give tax treatment of that as per income tax act
Replies (2)

As per the Income Tax Act, 1961, the tax treatment for IND AS 116 (Leases) would be as follows: 1. Depreciation on ROU (Right-of-Use) assets: - Allowable as a deduction under Section 32 (Depreciation) - Charge to Profit & Loss (P&L) account 2. Finance expenses (interest) on Lease liability: - Allowable as a deduction under Section 36(1)(iii) (Interest expenses) - Charge to P&L account Additionally, consider the following: - Ensure the depreciation is calculated as per the Income Tax Rules, 1962 ( Rule 5 - Depreciation) - Interest expenses are allowable only if they are related to the business and not capitalized - Keep records of the lease agreement, ROU assets, and lease liability for tax audit purposes

As per the Income Tax Act, 1961, the tax treatment for IND AS 116 (Leases) would be as follows: 1. Depreciation on ROU (Right-of-Use) assets: - Allowable as a deduction under Section 32 (Depreciation) - Charge to Profit & Loss (P&L) account 2. Finance expenses (interest) on Lease liability: - Allowable as a deduction under Section 36(1)(iii) (Interest expenses) - Charge to P&L account Additionally, consider the following: - Ensure the depreciation is calculated as per the Income Tax Rules, 1962 ( Rule 5 - Depreciation) - Interest expenses are allowable only if they are related to the business and not capitalized - Keep records of the lease agreement, ROU assets, and lease liability for tax audit purposes


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