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Tax Depreciation
03-24-2010, 05:10 PM,
Tax Depreciation
Dear All
I Want to know, what is Tax depreciation & Accounting Depreciation???
is this the depreciation we study in B.Com or some thing else????
03-24-2010, 08:38 PM,
Tax depreciation is the depreciation which is applied on assets as per the rates of depreciation specified in schedule 3 of Income Tax Ordinance 2001.

Accounting Depreciation is charged on assets at the rates determined by management. Accounting depreciation is charged at per rates specified and determined by management on the basis of internal policies and professional judgements.
03-24-2010, 08:41 PM,
Chota sa farak hay Tax deprecation or Accounting deprecation may.
Accounting Deprecation k mukhtalif method hay han,
1) Straight Line Method
2) Reducing Balance Method
3) Sum of Years Digit Method
4) Hourly Production Method
5) Units Production Method
Accounting may ham in may say koi bhi method use kar sakty han,,,,

Par Tax deprecation sirf Reducing balance method k trough hi nakali ja sakti hay,,,, jis may hamy ik khas percentage k hisam say deprecations nikalni hoti hay jo k ITO may darj hay.
03-25-2010, 07:46 PM,
Owais And LapTop sahab nay Bht achha jawab dia..

Now i would like to conclude the answer as

As Mr lap top said there are methods of depreciation in accounting
and Owais said rates are determent on the basis of internal policies,

for the purpose of tax liability calculation separate rate for depreciation are given by authorities which need to be applied there for difference between TAX AND ACCOUNTING DEPRECIATION arises.

Tax deprication calculated as per Depriciaton Method,rate or useful life specified by Authorities
Accounting deprecation calculated by using method, rate, or useful life determent by management.
03-25-2010, 08:07 PM,
OSAIDism bhai,,

Aap ki definition bohat achi lagi.
03-26-2010, 01:21 AM,
Thanks to you all for your kind support.
One more thing I want to know please. WHat is Tax "Gain on Disposal of Assets"????
03-26-2010, 01:50 AM,
consideration recieved less (cost less tax depriciation).
03-26-2010, 01:53 AM,
Consideration received on disposal of asset.

Less (Cost of Asset-Depreciation deduction allowed for tax purpose)

you will get the answer that is Tax gain on disposal of asset...
03-26-2010, 03:24 PM,
Your definitions are good but the terms tax depreciation and accounting depreciation are wide and many legalities are also involved. Furthermore the "Deferred Tax" ,in many cases, raised due to the presence of accounting and tax depreciation differences. Deferred Tax is dealt in accordance with International Accounting Standard-12 (IAS-12).Application of IAS-12 results in complication of calculations to determine vale of assets for tax and financial reporting purposes and often require maintenance of separate records of assets for tax and accounting purposes.
Currently Initial Allowance and First Year Allowance are allowed at the rate of 50% and 90% respectively under section 23 and 23(A) of ITO. In practice these allowances are not incorporated in the books of accounts but at the same time in mostly organization IAS-12 is not adopted in true sprit. In group of accounts and mergers (Consolidations and Amalgamation) the presence of deferred tax assets or deferred tax liabilities in the books of accounts of amalgamated, amalgamating, subsidiary and parent companies/organizations involve extensive application of IAS’s/IFRS’s and Legal provision of tax and corporate laws.


Awais Aftab

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