Companies act and IT act in depreciation

shradha1604

Hi all,

Can anyone plz tell me wht is the difference between Companies Act depreciation and IT act depreciation in FA?


Thanx nd Regards,
Shradha

ssingla

I am not exactly a Ax consultant but I will explain the logic. Indian Companies Act and Indian Income tax allows depreciation of assets in different ways. Few of the differences are as follow:

a) Income Tax allows only Written down value method, while company act allows depreciation on straight line method also.

b) Income tax treats the asset on block basis (FA Category) while Companies act works on individual asset basis i.e. in Income tax no income/loss is recognized on the sale/disposal of single or group of asset until the complete block of asset become less then zero.

c) The rate of depreciation are different.

d) Income tax treats 2 blocks i.e less than 180 days and more than 180 days for allowing depreciation for 1st year on assets. If >180 days full rate is applied else 50% of the rate is applicable. In companies act pro-rata basis is used.

There are lot more difference but I will cut it short now. These differences creates substantial variation in the FA register required to maintain under both laws and client needs to maintain both of them.

shradha1604

Hi,

Thanx..