Master in Accounts & high court Advocate
9615 Points
Posted on 01 October 2024
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