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Give the company law and income tax law depriciations rates
how both are calculte?
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What is Depreciation: Depreciation is the diminution in the
value of asset owing to Usage, obsolecence, passage of time.
Depreciation is meant to amortoize the cost of the asset
over the useful life of the asset.
The rates of depreciation are given as follows:
- in the Companies Act
- Under Income Tax ACt
- The depreciation rates under companies act are used to
charge the depreciation to P&L Account. Hence the
accounts / financial statements published use the rates of
depreciation given under Companies Act
- However, the rates under Income Tax act are used to
calculate the profit to compute the tax. Normally the
profit as per the P&L is taken and adjusted for the
additional deprecation rates allowed under Income Tax Act.
Higher rates of depreciation are allowed under Income tax
act to encourage investments in FIxed Assets by
corporates / businesses. Due to the higher rates of
depreciation the net profit on which tax is levied
(Computed) will be less.
| Is This Answer Correct ? | 17 Yes | 2 No |
Income Tax Department sends cheque for INR 2 Crore as Refund after completion of Assessment for A.Y.2011 - 2012 to a Company. As per IT Return filed for this year I.T. due to Government was INR 60 Lac but was assessed at INR 70 Lac. TDS due to Company was INR 3 Crore which was admitted as INR 2.7 Crore by Government. Government also adjusts Tax dues for A.Y. 2009 - 2010 of INR 40 Lac which was disputed earlier by the Company and Appeal was lying with the CIT. Government pays Interest to the Company amounting to INR 40 Lac. Provision for Income Tax made by the Company in its accounts for F.Y. 2010 - 2011 (A.Y. 2011 - 2012) was INR 50 Lac. What would be the Journal Entry at the time of receipt of Refund of INR 2 Crore from the Government in A.Y. 2014 - 2015 in the books of the Company?
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