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Provision reversal

Ajnas (Student) (844 Points)

29 July 2020

provision for doubtful debts Rs.50000 is created in the financial year 2018-19 and same is disallowed in the same year, but in the finacial year 2019-20 same provision Rs.50000 reversed at that time it is credited to P&L how it treat in income tax point of view? it is taxable again?...

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3 Replies

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 29 July 2020

In the income statement, it will be setoff against each other because it is reversed in the same year. There will be no tax consequences and a disclosure for the amounts reversed should be made.

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Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 29 July 2020

Provision for doubtful debts Rs.50,000 is created in the financial year 2018-19 and if same was claimed as expenses in the same year (i.e allowed in that year as expenses), but in the finacial year 2019-20 same provision Rs.50,000 reversed and credited to P&L than that amount is chargeable to tax.

If provision is disallowed (i.e not claimed as expenses), than when it reversed, there is no taxable because it's already disallowed.

Simply, if allowed last time as expenses, than when reversed taxable
and disallowed last time, than not taxable when reversed