Depreciation as per income tax rates

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Querist : Anonymous

Querist : Anonymous (Querist)

13 October 2013 HI,
OUR COMPANY FOLLOWS THE RATES OF DEPRECIATION AS PER INCOME TAX ACT,FOR PREPARATION OF ITS FINAL ACCOUNTS. MY QUERY IS WHETHER WE CAN USE THE RATES AS PER INCOME TAX ACT IRRESPECTIVE OF WHETHER THEY ARE MORE THAN THE MINIMUM RATES GIVEN IN COMPANIES ACT OR NOT. IS IT SUFFICIENT IF THE TOTAL DEPRECIATION CALCULATED AS PER INCOME TAX RATES IS MORE THAN THE ONE AS PER COMPANIES ACT OR IS IT THAT WE HAVE TO CONSIDER EACH ASSET CLASS INDIVIDUALLY.THANKING ALL YOU READERS IN ADVANCE.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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13 October 2013 As long as the rate of depreciation is more than the minimum rates prescribed in the companies act, its ok. But you cannot charge on rates lesser than Companies Act rates.

However, remember that even if you charge as per Income tax rates, the depreciation claim still differ since the method of computation of depreciation under companies act and income tax differ. (unless all the assets are put to use or disposed off as the start of the financial year or at 1 October of the year.

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Querist : Anonymous

Querist : Anonymous (Querist)

14 October 2013 THANKS FOR PROMPT REPLY,
IN MY QUESTION I MEANT TO SAY ONLY THE RATE OF DEPRECIATION, SINCE AS PER MY KNOWLEDGE A COMPANY HAS TO FOLLOW THE METHOD OF DEPRECIATION AS GIVEN IN ACCOUNTING STANDARDS
AND AS PER COMPANIES ACT. MY DOUBT ACTUALLY IS WHETHER WE CAN FOLLOW THE RATES GIVEN INCOME TAX ACT EVEN IF SOME OF THE ITEMS HAVE A LOWER RATE OF DEPRECIATION THOUGH THE TOTAL DEPRECIATION IS ALWAYS MORE THAN THE DEPRECIATION AS PER COMPANIES ACT RATES.THE OTHER THING AS PER MY KNOWLEDGE IS THAT THE DATE OF USE OF ASSET IN ORDER TO BE BELOW 180 DAYS SHOULD BE 4 OCTOBER ( APRIL TO SEP + 3 DAYS OF OCTOBER =30+31+30+31+31+30+2) SO THIS IS 186 DAYS I.E 365-186=179(below 180 days)

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Nikhil Kaushik

Nikhil Kaushik (Expert)
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14 October 2013 1. The rate of Depreciation, not the actual depreciation, on a particular class of assets should be more than the minimum rate prescribed under the Companies Act. So you can't have a rate lower than the companies act rate, whether the actual amount of depreciation is higher or lower is irrelevant.

2. As on 31 March you would count whether the asset has been used for less than 180 days. So reverse the working: 31( march) + 28/29 (for Feb)+ 31 (Jan) + 31 (Dec)+ 30 (Nov)+ 31(October) = that gives u 181. So you put the asset for use 1 October. Anyways 2 October is supposed to be a holiday!!!

2.

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Querist : Anonymous

Querist : Anonymous (Querist)

14 October 2013 THANKS FOR RESOLVING THE QUERY.AS PER INCOME TAX THE CATEGORIZATION ASSETS ABOVE 180 DAYS OF USE AND BELOW 180 DAYS(179 OR LESS)SO IN MY OPINION IT IS 4TH OF OCTOBER OR LATER WHICH SHOULD CONSIDERED AS THE DATE OF USE OF ASSET TO QUALIFY IN THE CATEGORY OF BELOW 180 DAYS.
I WOULD LIKE TO KNOW YOUR VIEW ON IT, THANK YOU.