Terminal and Unabsorbed Dep

Terminal depreciation

This term is related to only power sector businesses either production or supply and no other business

when ever an asset is sold for a consideration less than the WDV of the asset, the loss arising from it is charged as terminal depricaiton

If it sold for profit, i.e., more than WDV(but less than actual cost) the differnece is treated as balancing charge and is credited to P&La/c

If it is sold for a consideration which is more than actual cost of the asset then capital gain arises

*because of terminal depreciation concept, there is chance of capital loss for powe sector businesses

Unabsorbed depreciation-sec32(2)

It means that the part of depreciation which was unaborsed by the income of previous year because of insufficient income

this can be carry forwarded to indefinite period of time,  and this can be set off against any head of income once carry forwared.

generally the setoff will be as follows

1)depreciation of current year(as it is mandatory)

2)brought forward business loss(CF only for 8 years)

3)unabsorbed depreciation of previous years