Depriciation

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Narendra (Querist)
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01 August 2009 There are two ways of calculting the depriciation one is as per income tax act and another as per company act.

Pls guide we why we calculate the depricition by both the acts and which figures we take to the boooks of accounts.

Pls also gide me how to calculate the depriciation as per income tax act and as per company act.

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Narendra Singh

Shyam Lal Naik

Shyam Lal Naik (Expert)
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01 August 2009 Both the depreciation are not mutually exclusive. A company must calculate both the depreciation.

There is difference between depreciation and depreciation allowance(allowable depreciation). The depreciation under the Income Tax is for the limited purpose of calculating allowable depreciation in computing taxable profit.

Depreciation under the Companies Act is required to be provided to arrive at the financial reasult / to provide for replacement etc.

Depreciation as per Companies Act is taken in to the books of account.

Income tax provides for calculation of depreciation under written value method based on block of assets concept.

Depreciation under companies act provides two alternatives, ie. Straight line and WDV method. Accounting Standard 6 & 10 needs to be followed.