Effects of Restriction on Use of Depreciation method in Income Tax Act as compared to Companies Act in the industry

Usha Rajendra Pillewar

Volume : V, Issue : I, January - 2016

Effects of Restriction on Use of Depreciation method in Income Tax Act as compared to Companies Act in the industry

Usha Rajendra Pillewar

Abstract :

Despite different methods of depreciation calculation being available, when calculating depreciation for tax purposes a company must use a method being made mandatory by the Income Tax Act. In India the Companies Act allows the depreciation calculation by two methods Straight Line method and Written Down Value where as the method allowed by IT act is WDV. Choice of depreciation method has impact on taxation and overall efficiency and profitability of the firm. The paper discusses the effects of these limitations and variance in depreciation methods by two important regulating authorities on the overall performance of the industry. The paper also analyze the possible outcome of the synchronization of methods in IT Act and companies Act, the views and perceptions of chartered accountants in changed scenario. The need to synchronize the methods of depreciation and benefits to allow other methods are also examined in the conclusion.