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depreciation diff

Rahul Lambe (Sr. Accounts Executive) (35 Points)

07 October 2009

HI;

WHY THERE IS A DIFFERENCE IN FINANCIAL BOOK DEPRECIATION AND INCOME TAX RETURN,

A LIFE OF MACHINARY IS 10 YEARS AND SCRAP VALUE IS 50,000.00 PURCHASE VALUE 8,00,000.00 AS ON 01.01.2005

THEREFORE, I HAVE CALCULATED DEPRECIATION FOR MACHINARY AS:

750, 0000/10 = 75,000.00 P.A ($ 6,250.00 P.M)

BUT AS PER 2008 RETURN FILE THE DEPRECIATION AMOUNT OF MACHINARY IS ONLY 53,500.00 FOR 2008

CAN ANYONE PLEASE EXPLAIN AND HELP ME ON THIS?

ALSO, WHICH AMOUNT OF DEPRECIATION I SHOULD SHOW IN MY BOOKS OF ACCOUNTS?

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4 Replies

CA Manish K Dhoot (CA, B. Com, NCFM, CPCM) (5015 Points)
Replied 07 October 2009

In Income tax, The rates of depreciation are different from other acts.

In Income Tax dep. is provided as per block. The rate of Dep on Plant is 15 %.

Further Income tax doesn't consider the scrap value.

Dep. is provided on full amt.

when machine is sold then sale value is reduced from block of assets

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(Guest)

There are lots of method for charging depreciation........................Income tax has its own method of charging depreciation and companies act has its own method of charging depreciation.

So there are 100% of chances that there will be differences of Depreciation between financial books and As per Income tax

Julie Mehta (manager) (51 Points)
Replied 29 October 2009

can you please tell me the treatment of depreciation in case of impairment of assets as per income tax act

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HI;

WHY THERE IS A DIFFERENCE IN FINANCIAL BOOK DEPRECIATION AND INCOME TAX RETURN,
A LIFE OF MACHINARY IS 10 YEARS AND SCRAP VALUE IS 50,000.00 PURCHASE VALUE 8,00,000.00 AS ON 01.01.2005

THEREFORE, I HAVE CALCULATED DEPRECIATION FOR MACHINARY AS:
750, 0000/10 = 75,000.00 P.A ($ 6,250.00 P.M)
BUT AS PER 2008 RETURN FILE THE DEPRECIATION AMOUNT OF MACHINARY IS ONLY 53,500.00 FOR 2008

CAN ANYONE PLEASE EXPLAIN AND HELP ME ON THIS?
ALSO, WHICH AMOUNT OF DEPRECIATION I SHOULD SHOW IN MY BOOKS OF ACCOUNTS?