UNABSORBED DEPRECIATION

Dear Ravi, i will give you simple example for unabsorbed depreciation under income tax. For eg. 1) depreciation claimed under IT Act is rs 5,00,000/-, and total business loss is Rs 10,00,000/-. Now in this case unabsorbed depreciation is Rs 5,00,000/-( Rs 10 lakhs - Rs 5 lakhs). 2) depreciation claimed under IT Act is rs 5,00,000/-, and total business loss is Rs 2,00,000/-. Now in this case unabsorbed depreciation is Rs 2,00,000/-

Dear Ravi, I think u r totally mistaken.... Unabsorbed depreciation is a concept of Income Tax and not one of the accounts/ balance sheet... When there is inadequate profit or no profit at all as a result of which depreciation as per I.T. act cannot be set off...such un setoff or so called unabsorbed depreciation is carried forwards for an infinite period till such business is continued until it has been set against future profits.

Unabsorbed depreciation - Its the amount of depreciation which the assessee couldnt claim as expenditure in his profit and loss account due to lack of sufficient credit in the credit side of p&l account or other expenses.. such loss in p&l account due to the excess depreciation is called unabsorbed depreciation. such depreciation can be set off against any head of income in the current year and the balance not setoff can be carried forward for any number of years. treatment of current year depreciation: a. claim deduction of current year depreciation from the business to which it relates. b. Deficiency in a. can be setoff against profits and gains of any other business of the assessee. c. Deficiency in b. can be set off against any other head of income of current previous year d. Deficiency in c. is "unabsorbed depreciation" for the current previous year. the unabsorbed depreciation has same treatment as business loss which is carried forward - for accounting purpose.

@ Parthasarthy

I am thoroughly confused with this now.

The following is my understanding of this concept:

As per  Section 32(2), one can carry forward the unabsorbed depreciation subject to provisions of Section 72(3), 73(3). As per Sec 71, the Set-Off of PGBP Income takes place against income from any head EXCEPT SALARY.

Can you/someone please quote the exact section(s) which state that unabsorbed depreciation can be set off against ANY HEAD OF INCOME IN THE SUCCESSIVE YEAR(S)....Your help would be highly appreciated.

Hi,

i don't  know about this

set off and carry forward of unabsorbed depriciation under sec 32(2).information

You can carry forward unabsorbed Depreciation and treat it like that years Busienss income.

Unabsorbed Dep. has been explained u/s 32(2) of the IT Act, 1961.

Hi Mr. Ravi,

Amount of depreciation calculated shll be allowed as a deduction under section 32 while

computing income under the head "Business and Profession".

If, in a particular year there are losses or inadequate profits, depreciation amount may not be

fully deductible. In such cases, the amount that cannot be deducted wholly or partially can be

set off against any other income. If such ‘unabsorbed depreciation’ cannot be adjusted

against the income of the same year, it can be carried forward to next year and can be

adjusted against any income of the next year and so on. Unabsorbed depreciation can be

carried forward for any number of years without any limitation.

I hope you will find this information useful.

Regards

Vijay Kumar

 

thanks .well i had the same querry

Dear All,

The Assessee (PVT LTD) has not claimed the depreciation during the financial year. Bcz, the assessee has not any income. During this period the assessee wish to not claim depreciation. i.e the assessee has not given any information abt the depreciation in the return form. Subsequently, the assessee wish to claim the depreciation (i.e. the next financial year) .

Can assessee claim depreciation at double rate in the subsequent financial year?

i.e. Furniture & fittings - 10%

Assessee wish to claim the depreciation in the return form @ 20% in the next financial year. Is it possible?

 

No it is not possible for the assessee to claim double depreciation. There is no such provision in income tax.

You can say that unabsorbed depreciation is like 'HIRA' of Income tax, which can be carry forward indefinitely and can be set off from profit or gains chargeable to subsequent year till ots is fully set off.

i did not account for nor claim depreciation on my car for asst yr 2008-09 and 2009-10. WDV at 31/3/2007 was 2,50,000. i have sold the car on 1/12/09. i have not bought any other car. can i claim depreciation for fin yrs 2007-08  and 2008-09 as unabsorbed depreciation for asst yr 2010-11