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VIU tax provisions

Yasaswi Gomes new (Finance ) (4543 Points)

30 January 2025

Hi all

Since impairment loss is tax exempt, I just have one query

When we calculate VIU cashflows, I'm calculating them from Income statement. IndAS method.

What are the tax provisions related to it?

Which U/S explains how to prepare them?

Regards

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Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (6254 Points)
Replied 30 January 2025

When calculating Value-in-Use (VIU) cash flows using the IndAS method, you'll need to consider the tax implications.

Tax Provisions for VIU Cash Flows The tax provisions related to VIU cash flows are outlined in the Income-tax Act, 1961, specifically: Section 36(1)(iii)

This section allows a deduction for the amount of depreciation, although the asset might have been depreciated at a rate higher than the rate prescribed under the Act.

Section 43(6) This section defines the "written down value" (WDV) of an asset, which is used to calculate depreciation.

Section 50 This section deals with the capital gains tax implications when an asset is retired or sold.

Section 115JB This section explains the Minimum Alternate Tax (MAT) provisions, which might be applicable when calculating VIU cash flows.

For preparing tax provisions related to VIU cash flows, you can refer to: AS 28: Impairment of Assets This Accounting Standard provides guidance on recognizing and measuring impairment losses.

Ind AS 36: Impairment of Assets This Indian Accounting Standard provides guidance on recognizing and measuring impairment losses, including the calculation of VIU cash flows.

CBDT Circulars and Notifications The Central Board of Direct Taxes (CBDT) issues circulars and notifications that provide guidance on tax provisions and implications.

You can refer to these circulars and notifications for specific guidance on tax provisions related to VIU cash flows.

When preparing tax provisions for VIU cash flows, ensure you consider the following: 1. *Depreciation*: Calculate depreciation as per the Income-tax Act, 1961.

2. *Impairment loss*: Recognize impairment loss as per Ind AS 36.

3. *Tax rates*: Apply the applicable tax rates to the VIU cash flows.

4. *MAT provisions*: Consider the MAT provisions under Section 115JB.

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Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (6254 Points)
Replied 30 January 2025

When calculating Value-in-Use (VIU) cash flows using the IndAS method, you'll need to consider the tax implications.

Tax Provisions for VIU Cash Flows The tax provisions related to VIU cash flows are outlined in the Income-tax Act, 1961, specifically: Section 36(1)(iii)

This section allows a deduction for the amount of depreciation, although the asset might have been depreciated at a rate higher than the rate prescribed under the Act.

Section 43(6) This section defines the "written down value" (WDV) of an asset, which is used to calculate depreciation.

Section 50 This section deals with the capital gains tax implications when an asset is retired or sold.

Section 115JB This section explains the Minimum Alternate Tax (MAT) provisions, which might be applicable when calculating VIU cash flows.

For preparing tax provisions related to VIU cash flows, you can refer to: AS 28: Impairment of Assets This Accounting Standard provides guidance on recognizing and measuring impairment losses.

Ind AS 36: Impairment of Assets This Indian Accounting Standard provides guidance on recognizing and measuring impairment losses, including the calculation of VIU cash flows.

CBDT Circulars and Notifications The Central Board of Direct Taxes (CBDT) issues circulars and notifications that provide guidance on tax provisions and implications.

You can refer to these circulars and notifications for specific guidance on tax provisions related to VIU cash flows.

When preparing tax provisions for VIU cash flows, ensure you consider the following: 1. *Depreciation*: Calculate depreciation as per the Income-tax Act, 1961.

2. *Impairment loss*: Recognize impairment loss as per Ind AS 36.

3. *Tax rates*: Apply the applicable tax rates to the VIU cash flows.

4. *MAT provisions*: Consider the MAT provisions under Section 115JB.

1 Like

Yasaswi Gomes new (Finance ) (4543 Points)
Replied 30 January 2025

+/- tax and tax incentive Adjustments to the VIU cashflows:

Current tax 100

DT expense 50

= 150 this is the amount I'm going use for above adjustment. Correct?

Another hypothetical case:

Current tax 50

DT income 50

= 0 this is the amount I'm going use for above adjustment. Correct.

Please note: I derive these cashflows from income statement. I take PAT and make all adjustments to every line item mentioned in the paragraphs.

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