Depreciation

This query is : Resolved

Sneha (Querist)
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25 April 2011 In case of BOT Road project:
PBT: A
Add: SLM Dep B
Less: WDV Dep C
Taxable Profit: (A+B-C)
Pls explain the logic behind once adding dep and then again deducting it.

Kalpp

Kalpp (Expert)
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25 April 2011 My two cents Sneha :

Since PBT means accounting profit, it is calculated after deducting depriciation as per method adopted by the company (SLM in this case.

But as per IT act for calculation of Taxable income deduction for depriciation is available only on prescribed rates and as per WDV method.

Now for your query - SLM dep is added to arrive at PBT and before depriciation

From this profit WDV dep is deducted to arrive at Taxable Income.

See the reverse working

EBITDA 250
less Dep SLM 50
less Int 20
PBT (200-50-20) 180

now IT act says SLM is not allowed so we will add 50 to 180 to arrive at PBT before Dep i.e 230

and suppose WDV dep is 45 then we will deduct 45 from 230 = 185 (and calculate tax on this)

SHORTER VERSION WOULD BE :

EBITDA 250
less Dep WDV 45
less Int 20
PBT (200-45-20) 185

HOPE U GOT D LOGIC!!!!!