In simple terms, a block of assets is a grouping of similar assets that are used for the same business purpose, on which depreciation is calculated collectively rather than individually. This concept is crucial for ensuring a uniform method of depreciation and avoiding the cumbersome process of calcRead more
In simple terms, a block of assets is a grouping of similar assets that are used for the same business purpose, on which depreciation is calculated collectively rather than individually. This concept is crucial for ensuring a uniform method of depreciation and avoiding the cumbersome process of calculating depreciation for each asset separately.
Key Points:
Definition & Purpose: The Income Tax Act, 1961 (particularly under Section 32) groups together assets that are similar in nature and use, such as all machinery, all computers, or all vehicles used in a business, into what is called a block of assets.
This approach simplifies the calculation of depreciation by applying the same depreciation rate to the entire group.
How It Works:
Cost Accumulation: The cost of all assets in a block is combined.
Depreciation Calculation: Depreciation is then computed on the entire block’s cost, and the written down value is carried forward from one year to the next for the entire block.
Adjustments: When new assets are added or old assets are disposed of, the block’s cost is adjusted accordingly.
Benefits:
Simplification: This method reduces administrative burden, especially for businesses with a large number of similar assets.
Uniformity: It ensures consistency in how depreciation is claimed over time.
When calculating depreciation for tax purposes, the Written Down Value (WDV) method is commonly used. This method allows you to claim depreciation on an asset based on its reduced value after accounting for previous depreciation. Step-by-Step Calculation: Determine the Cost of Acquisition: Begin witRead more
When calculating depreciation for tax purposes, the Written Down Value (WDV) method is commonly used. This method allows you to claim depreciation on an asset based on its reduced value after accounting for previous depreciation.
Step-by-Step Calculation:
Determine the Cost of Acquisition:
Begin with the actual purchase price of the asset plus any incidental costs (such as installation, transportation, etc.).
This initial cost is your base cost for depreciation.
Calculate Depreciation for the Year:
Use the prescribed rate for the asset as defined under the Income Tax Act (refer to Section 32 for specific rates).
Depreciation for the Year = (Base Cost – Accumulated Depreciation) × Applicable Rate
Compute the WDV:
WDV at the End of the Year = (Cost of Acquisition) – (Total Depreciation Claimed to Date)
In simpler terms, the WDV is the original cost reduced by all the depreciation deductions that have been allowed in the previous years.
Example Illustration:
Suppose you purchase machinery for ₹10,00,000. The applicable depreciation rate for the machinery is 15% per annum.
First Year Depreciation: Depreciation = ₹10,00,000 × 15% = ₹1,50,000 WDV at end of Year 1 = ₹10,00,000 – ₹1,50,000 = ₹8,50,000
Second Year Depreciation: Depreciation = ₹8,50,000 × 15% = ₹1,27,500 WDV at end of Year 2 = ₹8,50,000 – ₹1,27,500 = ₹7,22,500
This process continues each year until the asset is fully depreciated or disposed of.
Depreciation allowance is a deduction available under Section 32 of the Income Tax Act, 1961, allowing businesses to claim a portion of the cost of assets used in their operations. This deduction recognizes the wear and tear or obsolescence of assets over time and helps in reducing taxable income. KRead more
Depreciation allowance is a deduction available under Section 32 of the Income Tax Act, 1961, allowing businesses to claim a portion of the cost of assets used in their operations. This deduction recognizes the wear and tear or obsolescence of assets over time and helps in reducing taxable income.
Key Aspects of Depreciation Allowance
1. Eligible Assets
Depreciation can be claimed on the following assets:
Tangible Assets: Buildings, machinery, plant, furniture, etc.
Intangible Assets: Patents, copyrights, trademarks, licenses, and other similar business rights.
2. Conditions for Claiming Depreciation
To avail of depreciation allowance, the following conditions must be met:
The asset must be owned (wholly or partly) by the taxpayer.
It must be used for business or professional purposes during the relevant financial year.
3. Block of Assets Concept
Depreciation is calculated based on the block of assets approach, where assets of similar nature and usage are grouped together. The entire block is subject to depreciation, rather than individual assets.
4. Depreciation Rates
The Income Tax Act specifies different depreciation rates depending on the type of asset:
Buildings: 5% (residential) or 10% (commercial)
Plant & Machinery: 15% (general machinery, higher for specific equipment)
Furniture & Fittings: 10%
Computers & Software: 40%
Intangible Assets: 25%
5. Methods of Depreciation
Written Down Value (WDV) Method: Used for most businesses where depreciation is applied to the asset’s reduced value each year.
Straight-Line Method (SLM): Available only to certain undertakings (e.g., power generation units), where depreciation is equally spread over the asset’s life.
6. Additional Depreciation
For businesses engaged in manufacturing or power generation, additional depreciation may be available on new plant and machinery, subject to conditions.
Under the Income Tax Act, depreciation is a deduction allowed for the wear and tear of tangible and intangible assets used in a business or profession. However, there are specific situations where claiming depreciation is either restricted or disallowed: Assets Not Owned by the Assessee: DepreciRead more
Under the Income Tax Act, depreciation is a deduction allowed for the wear and tear of tangible and intangible assets used in a business or profession.However, there are specific situations where claiming depreciation is either restricted or disallowed:
Assets Not Owned by the Assessee: Depreciation can only be claimed on assets that are owned, wholly or partly, by the taxpayer. If the taxpayer does not have ownership of the asset, depreciation is not permissible.
Assets Not Used for Business or Professional Purposes: The asset must be employed in the taxpayer’s business or profession during the relevant financial year. Assets held for personal use or those not put to use during the year are ineligible for depreciation claims.
Land and Goodwill: Depreciation is not allowable on land, as it does not suffer wear and tear. Similarly, following amendments effective from April 1, 2021, goodwill of a business or profession is specifically excluded from the definition of a depreciable asset, and depreciation on goodwill is disallowed.
Assets Used for Charitable or Religious Purposes: For entities claiming exemption under sections 11 and 12, if the cost of acquiring an asset has been treated as an application of income (i.e., considered as expenditure towards charitable or religious purposes), depreciation cannot be claimed on such assets to prevent double deduction.
Assets Acquired and Sold Within the Same Financial Year: If an asset is purchased and disposed of within the same financial year, it is not eligible for depreciation, as it has not been used for business purposes during the year.
Personal or Non-Business Use: Assets used exclusively for personal purposes or not utilized for business or professional activities are not eligible for depreciation under the Income Tax Act.
If your GST registration has been cancelled—either voluntarily or by the tax authorities—you may have the option to restore it if your business operations have resumed. Here’s a quick guide on how to do that: Step 1: Check the Cancellation Status and Time Limit If your registration was cancelled andRead more
If your GST registration has been cancelled—either voluntarily or by the tax authorities—you may have the option to restore it if your business operations have resumed. Here’s a quick guide on how to do that:
Step 1: Check the Cancellation Status and Time Limit
If your registration was cancelled and you wish to resume your business, you need to check whether you’re still within the allowed window for restoration.
Typically, you can apply for restoration within a prescribed period (usually within 30 days from the cancellation date). If you miss this window, you might have to register as a new taxpayer.
Step 2: Log In to the GST Portal
Visit the official GST portal and log in using your credentials.
Step 3: Submit an Application for Restoration
Navigate to the registration section and look for the option to “Restore Registration” or “Resume Registration.”
Complete the application form, providing all the required details and the reason for restoration (such as resumption of business).
Step 4: File All Pending Returns and Clear Outstanding Dues
Ensure that any pending GST returns are filed.
Settle any outstanding taxes or interest to avoid complications during the restoration process.
Step 5: Await Approval
After submitting your application, the GST authorities will review your request.
If approved, your GST registration will be restored, and you can continue with your business activities under the same GSTIN.
Yes, you can apply for the surrender of your GST registration if you no longer meet the eligibility criteria or if you wish to discontinue your GST compliance. Here’s what you need to know: Eligibility for Surrender:If your business turnover falls below the threshold, or if you are no longer engagedRead more
Yes, you can apply for the surrender of your GST registration if you no longer meet the eligibility criteria or if you wish to discontinue your GST compliance. Here’s what you need to know:
Eligibility for Surrender: If your business turnover falls below the threshold, or if you are no longer engaged in any taxable activities, you may opt to surrender your GST registration.
Relevant Provisions: Under the CGST Act, provisions allow taxpayers to voluntarily surrender their GST number. This process is intended to help businesses avoid unnecessary compliance if they are no longer required to be registered.
Procedure to Surrender Your GST Number:
Log in to the GST Portal: Access your account on the official GST portal.
Submit an Application: Fill out the form for cancellation/surrender of registration, providing the required details and reasons.
Compliance Check: Ensure that all pending returns are filed and any outstanding tax liabilities or refunds are settled.
Confirmation: Once your application is processed, you will receive confirmation that your GST registration has been surrendered.
Important Reminder: Surrendering your GST number means you can no longer collect GST on your sales or claim input tax credits. Make sure this is the right step for your business before applying.
If you fail to file your GST return by the due date, you can incur a penalty under the GST law. Here’s a straightforward explanation: 1. Daily Penalty: General Taxpayers:You may be charged a penalty of ₹50 per day for each day the return is late. Small Taxpayers:If your aggregate turnover is up to ₹Read more
If you fail to file your GST return by the due date, you can incur a penalty under the GST law. Here’s a straightforward explanation:
1. Daily Penalty:
General Taxpayers: You may be charged a penalty of ₹50 per day for each day the return is late.
Small Taxpayers: If your aggregate turnover is up to ₹1.5 crore, the penalty is typically ₹20 per day.
2. Maximum Limit:
The daily penalties accumulate up to a maximum limit, which is generally ₹5,000 for most taxpayers and ₹1,000 for small taxpayers.
3. Additional Considerations:
Interest: Note that aside from the penalty, interest may also be charged on any tax due if the return is not filed on time.
Continuous Non-Filing: If returns are not filed for a continuous period, the tax authorities may take further actions, such as restrictions on claiming input tax credits.
Reverse charge is a mechanism under the Goods and Services Tax (GST) system where the responsibility for paying GST shifts from the supplier to the recipient. This means that instead of the seller collecting the tax from the buyer, the buyer is required to pay the GST directly to the government. KeyRead more
Reverse charge is a mechanism under the Goods and Services Tax (GST) system where the responsibility for paying GST shifts from the supplier to the recipient. This means that instead of the seller collecting the tax from the buyer, the buyer is required to pay the GST directly to the government.
Key Points:
Liability Shift: Under the reverse charge mechanism (RCM), if you are the recipient of certain specified goods or services, you must pay the applicable GST even if the supplier does not charge it.
Applicable Situations: Reverse charge is applicable in specific cases mandated by the GST law. This can include:
Certain categories of goods and services notified by the government.
Supplies from unregistered persons where the recipient is registered.
Transactions involving government departments or agencies.
Relevant Provisions: The provisions for reverse charge are primarily found in the GST Acts (both CGST and IGST), which outline the circumstances and conditions under which RCM applies.
Compliance: As a recipient, if you fall under the reverse charge mechanism, you must:
Pay the GST on the purchase.
Ensure proper accounting and reporting in your GST returns.
Claim input tax credit (if eligible) on the tax paid under reverse charge.
A:If you’re required to register under GST and fail to do so, the law imposes a penalty to discourage non-compliance. Here’s what you need to know: Penalty Provision:Under the CGST Act, if you do not register within the prescribed time, you may face a penalty. This penalty is generally calculated asRead more
A: If you’re required to register under GST and fail to do so, the law imposes a penalty to discourage non-compliance. Here’s what you need to know:
Penalty Provision: Under the CGST Act, if you do not register within the prescribed time, you may face a penalty. This penalty is generally calculated as a percentage of the tax that should have been collected on your turnover. In practice, it is often around 10% of the tax due on the turnover that required registration, with a minimum penalty amount prescribed by the authorities.
Additional Charges: Along with the penalty, interest may be charged on the unpaid tax amount until you complete your registration and clear the outstanding dues.
Importance of Timely Registration: Registering on time not only helps you avoid these financial penalties and interest but also ensures that you can avail input tax credits and comply with other GST compliance requirements.
Terminal Depreciation is essentially the final depreciation deduction that a taxpayer can claim on a fixed asset in the year it is disposed of or written off. It helps ensure that the entire cost of the asset is eventually written off for tax purposes. How It Works: Final Year Adjustment:When an assRead more
Terminal Depreciation is essentially the final depreciation deduction that a taxpayer can claim on a fixed asset in the year it is disposed of or written off. It helps ensure that the entire cost of the asset is eventually written off for tax purposes.
How It Works:
Final Year Adjustment: When an asset is sold or otherwise disposed of before the end of its useful life, the usual depreciation calculation may leave a remaining balance (the written down value). Terminal depreciation is the pro-rata depreciation claimed in the year of disposal based on the number of days the asset was in use.
Pro-Rata Calculation: In the disposal year, depreciation is calculated on a pro-rata basis. This means if the asset was used for part of the year, you claim a proportionate deduction for that period. This final adjustment is what we call terminal depreciation.
Purpose: The idea is to fully account for the cost of the asset in your tax computations. Without terminal depreciation, there might be an unabsorbed cost remaining in the books when the asset is disposed of.
Key Point:
Section 32 of the Income Tax Act, 1961 governs the depreciation of assets, including the pro-rata (or terminal) depreciation in the year of disposal. While “terminal depreciation” isn’t mentioned by name in the Act, the concept is inherent in the depreciation calculations applied when an asset is retired.
What is block of assets as per Income Tax Act?
In simple terms, a block of assets is a grouping of similar assets that are used for the same business purpose, on which depreciation is calculated collectively rather than individually. This concept is crucial for ensuring a uniform method of depreciation and avoiding the cumbersome process of calcRead more
In simple terms, a block of assets is a grouping of similar assets that are used for the same business purpose, on which depreciation is calculated collectively rather than individually. This concept is crucial for ensuring a uniform method of depreciation and avoiding the cumbersome process of calculating depreciation for each asset separately.
Key Points:
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-
-
-
-
-
-
-
-
See lessDefinition & Purpose:
The Income Tax Act, 1961 (particularly under Section 32) groups together assets that are similar in nature and use, such as all machinery, all computers, or all vehicles used in a business, into what is called a block of assets.
This approach simplifies the calculation of depreciation by applying the same depreciation rate to the entire group.
How It Works:
Cost Accumulation: The cost of all assets in a block is combined.
Depreciation Calculation: Depreciation is then computed on the entire block’s cost, and the written down value is carried forward from one year to the next for the entire block.
Adjustments: When new assets are added or old assets are disposed of, the block’s cost is adjusted accordingly.
Benefits:
Simplification: This method reduces administrative burden, especially for businesses with a large number of similar assets.
Uniformity: It ensures consistency in how depreciation is claimed over time.
How to calculate WDV of an assets as per Income Tax Act?
When calculating depreciation for tax purposes, the Written Down Value (WDV) method is commonly used. This method allows you to claim depreciation on an asset based on its reduced value after accounting for previous depreciation. Step-by-Step Calculation: Determine the Cost of Acquisition: Begin witRead more
When calculating depreciation for tax purposes, the Written Down Value (WDV) method is commonly used. This method allows you to claim depreciation on an asset based on its reduced value after accounting for previous depreciation.
Step-by-Step Calculation:
Determine the Cost of Acquisition:
Begin with the actual purchase price of the asset plus any incidental costs (such as installation, transportation, etc.).
This initial cost is your base cost for depreciation.
Calculate Depreciation for the Year:
Use the prescribed rate for the asset as defined under the Income Tax Act (refer to Section 32 for specific rates).
Depreciation for the Year = (Base Cost – Accumulated Depreciation) × Applicable Rate
Compute the WDV:
WDV at the End of the Year = (Cost of Acquisition) – (Total Depreciation Claimed to Date)
In simpler terms, the WDV is the original cost reduced by all the depreciation deductions that have been allowed in the previous years.
Example Illustration:
Suppose you purchase machinery for ₹10,00,000. The applicable depreciation rate for the machinery is 15% per annum.
First Year Depreciation:
Depreciation = ₹10,00,000 × 15% = ₹1,50,000
WDV at end of Year 1 = ₹10,00,000 – ₹1,50,000 = ₹8,50,000
Second Year Depreciation:
Depreciation = ₹8,50,000 × 15% = ₹1,27,500
WDV at end of Year 2 = ₹8,50,000 – ₹1,27,500 = ₹7,22,500
This process continues each year until the asset is fully depreciated or disposed of.
See lessWhat is depreciation allowance as per Income Tax Act?
Depreciation allowance is a deduction available under Section 32 of the Income Tax Act, 1961, allowing businesses to claim a portion of the cost of assets used in their operations. This deduction recognizes the wear and tear or obsolescence of assets over time and helps in reducing taxable income. KRead more
Depreciation allowance is a deduction available under Section 32 of the Income Tax Act, 1961, allowing businesses to claim a portion of the cost of assets used in their operations. This deduction recognizes the wear and tear or obsolescence of assets over time and helps in reducing taxable income.
Key Aspects of Depreciation Allowance
1. Eligible Assets
Depreciation can be claimed on the following assets:
Tangible Assets: Buildings, machinery, plant, furniture, etc.
Intangible Assets: Patents, copyrights, trademarks, licenses, and other similar business rights.
2. Conditions for Claiming Depreciation
To avail of depreciation allowance, the following conditions must be met:
The asset must be owned (wholly or partly) by the taxpayer.
It must be used for business or professional purposes during the relevant financial year.
3. Block of Assets Concept
Depreciation is calculated based on the block of assets approach, where assets of similar nature and usage are grouped together. The entire block is subject to depreciation, rather than individual assets.
4. Depreciation Rates
The Income Tax Act specifies different depreciation rates depending on the type of asset:
Buildings: 5% (residential) or 10% (commercial)
Plant & Machinery: 15% (general machinery, higher for specific equipment)
Furniture & Fittings: 10%
Computers & Software: 40%
Intangible Assets: 25%
5. Methods of Depreciation
Written Down Value (WDV) Method: Used for most businesses where depreciation is applied to the asset’s reduced value each year.
Straight-Line Method (SLM): Available only to certain undertakings (e.g., power generation units), where depreciation is equally spread over the asset’s life.
6. Additional Depreciation
For businesses engaged in manufacturing or power generation, additional depreciation may be available on new plant and machinery, subject to conditions.
See lessWhat are the situations wherein deduction of depreciation is not allowed as per Income Tax Act?
Under the Income Tax Act, depreciation is a deduction allowed for the wear and tear of tangible and intangible assets used in a business or profession. However, there are specific situations where claiming depreciation is either restricted or disallowed: Assets Not Owned by the Assessee: DepreciRead more
Under the Income Tax Act, depreciation is a deduction allowed for the wear and tear of tangible and intangible assets used in a business or profession. However, there are specific situations where claiming depreciation is either restricted or disallowed:
-
-
-
-
-
-
See lessAssets Not Owned by the Assessee: Depreciation can only be claimed on assets that are owned, wholly or partly, by the taxpayer. If the taxpayer does not have ownership of the asset, depreciation is not permissible.
Assets Not Used for Business or Professional Purposes: The asset must be employed in the taxpayer’s business or profession during the relevant financial year. Assets held for personal use or those not put to use during the year are ineligible for depreciation claims.
Land and Goodwill: Depreciation is not allowable on land, as it does not suffer wear and tear. Similarly, following amendments effective from April 1, 2021, goodwill of a business or profession is specifically excluded from the definition of a depreciable asset, and depreciation on goodwill is disallowed.
Assets Used for Charitable or Religious Purposes: For entities claiming exemption under sections 11 and 12, if the cost of acquiring an asset has been treated as an application of income (i.e., considered as expenditure towards charitable or religious purposes), depreciation cannot be claimed on such assets to prevent double deduction.
Assets Acquired and Sold Within the Same Financial Year: If an asset is purchased and disposed of within the same financial year, it is not eligible for depreciation, as it has not been used for business purposes during the year.
Personal or Non-Business Use: Assets used exclusively for personal purposes or not utilized for business or professional activities are not eligible for depreciation under the Income Tax Act.
How to resume cancelled GST registration?
If your GST registration has been cancelled—either voluntarily or by the tax authorities—you may have the option to restore it if your business operations have resumed. Here’s a quick guide on how to do that: Step 1: Check the Cancellation Status and Time Limit If your registration was cancelled andRead more
If your GST registration has been cancelled—either voluntarily or by the tax authorities—you may have the option to restore it if your business operations have resumed. Here’s a quick guide on how to do that:
Step 1: Check the Cancellation Status and Time Limit
If your registration was cancelled and you wish to resume your business, you need to check whether you’re still within the allowed window for restoration.
Typically, you can apply for restoration within a prescribed period (usually within 30 days from the cancellation date). If you miss this window, you might have to register as a new taxpayer.
Step 2: Log In to the GST Portal
Visit the official GST portal and log in using your credentials.
Step 3: Submit an Application for Restoration
Navigate to the registration section and look for the option to “Restore Registration” or “Resume Registration.”
Complete the application form, providing all the required details and the reason for restoration (such as resumption of business).
Step 4: File All Pending Returns and Clear Outstanding Dues
Ensure that any pending GST returns are filed.
Settle any outstanding taxes or interest to avoid complications during the restoration process.
Step 5: Await Approval
-
-
See lessAfter submitting your application, the GST authorities will review your request.
If approved, your GST registration will be restored, and you can continue with your business activities under the same GSTIN.
Can we apply for surrender of GST number?
Yes, you can apply for the surrender of your GST registration if you no longer meet the eligibility criteria or if you wish to discontinue your GST compliance. Here’s what you need to know: Eligibility for Surrender:If your business turnover falls below the threshold, or if you are no longer engagedRead more
Yes, you can apply for the surrender of your GST registration if you no longer meet the eligibility criteria or if you wish to discontinue your GST compliance. Here’s what you need to know:
-
-
-
-
-
-
-
-
See lessEligibility for Surrender:
If your business turnover falls below the threshold, or if you are no longer engaged in any taxable activities, you may opt to surrender your GST registration.
Relevant Provisions:
Under the CGST Act, provisions allow taxpayers to voluntarily surrender their GST number. This process is intended to help businesses avoid unnecessary compliance if they are no longer required to be registered.
Procedure to Surrender Your GST Number:
Log in to the GST Portal:
Access your account on the official GST portal.
Submit an Application:
Fill out the form for cancellation/surrender of registration, providing the required details and reasons.
Compliance Check:
Ensure that all pending returns are filed and any outstanding tax liabilities or refunds are settled.
Confirmation:
Once your application is processed, you will receive confirmation that your GST registration has been surrendered.
Important Reminder:
Surrendering your GST number means you can no longer collect GST on your sales or claim input tax credits. Make sure this is the right step for your business before applying.
What is the penalty for not filing of GST return?
If you fail to file your GST return by the due date, you can incur a penalty under the GST law. Here’s a straightforward explanation: 1. Daily Penalty: General Taxpayers:You may be charged a penalty of ₹50 per day for each day the return is late. Small Taxpayers:If your aggregate turnover is up to ₹Read more
If you fail to file your GST return by the due date, you can incur a penalty under the GST law. Here’s a straightforward explanation:
1. Daily Penalty:
General Taxpayers:
You may be charged a penalty of ₹50 per day for each day the return is late.
Small Taxpayers:
If your aggregate turnover is up to ₹1.5 crore, the penalty is typically ₹20 per day.
2. Maximum Limit:
The daily penalties accumulate up to a maximum limit, which is generally ₹5,000 for most taxpayers and ₹1,000 for small taxpayers.
3. Additional Considerations:
-
-
See lessInterest:
Note that aside from the penalty, interest may also be charged on any tax due if the return is not filed on time.
Continuous Non-Filing:
If returns are not filed for a continuous period, the tax authorities may take further actions, such as restrictions on claiming input tax credits.
What is reversed charge in GST?
Reverse charge is a mechanism under the Goods and Services Tax (GST) system where the responsibility for paying GST shifts from the supplier to the recipient. This means that instead of the seller collecting the tax from the buyer, the buyer is required to pay the GST directly to the government. KeyRead more
Reverse charge is a mechanism under the Goods and Services Tax (GST) system where the responsibility for paying GST shifts from the supplier to the recipient. This means that instead of the seller collecting the tax from the buyer, the buyer is required to pay the GST directly to the government.
Key Points:
-
-
-
-
-
-
-
-
-
-
See lessLiability Shift:
Under the reverse charge mechanism (RCM), if you are the recipient of certain specified goods or services, you must pay the applicable GST even if the supplier does not charge it.
Applicable Situations:
Reverse charge is applicable in specific cases mandated by the GST law. This can include:
Certain categories of goods and services notified by the government.
Supplies from unregistered persons where the recipient is registered.
Transactions involving government departments or agencies.
Relevant Provisions:
The provisions for reverse charge are primarily found in the GST Acts (both CGST and IGST), which outline the circumstances and conditions under which RCM applies.
Compliance:
As a recipient, if you fall under the reverse charge mechanism, you must:
Pay the GST on the purchase.
Ensure proper accounting and reporting in your GST returns.
Claim input tax credit (if eligible) on the tax paid under reverse charge.
What is the penalty for not registering in GST?
A:If you’re required to register under GST and fail to do so, the law imposes a penalty to discourage non-compliance. Here’s what you need to know: Penalty Provision:Under the CGST Act, if you do not register within the prescribed time, you may face a penalty. This penalty is generally calculated asRead more
A:
If you’re required to register under GST and fail to do so, the law imposes a penalty to discourage non-compliance. Here’s what you need to know:
-
-
-
See lessPenalty Provision:
Under the CGST Act, if you do not register within the prescribed time, you may face a penalty. This penalty is generally calculated as a percentage of the tax that should have been collected on your turnover. In practice, it is often around 10% of the tax due on the turnover that required registration, with a minimum penalty amount prescribed by the authorities.
Additional Charges:
Along with the penalty, interest may be charged on the unpaid tax amount until you complete your registration and clear the outstanding dues.
Importance of Timely Registration:
Registering on time not only helps you avoid these financial penalties and interest but also ensures that you can avail input tax credits and comply with other GST compliance requirements.
What is terminal Depreciation?
Terminal Depreciation is essentially the final depreciation deduction that a taxpayer can claim on a fixed asset in the year it is disposed of or written off. It helps ensure that the entire cost of the asset is eventually written off for tax purposes. How It Works: Final Year Adjustment:When an assRead more
Terminal Depreciation is essentially the final depreciation deduction that a taxpayer can claim on a fixed asset in the year it is disposed of or written off. It helps ensure that the entire cost of the asset is eventually written off for tax purposes.
How It Works:
Final Year Adjustment:
When an asset is sold or otherwise disposed of before the end of its useful life, the usual depreciation calculation may leave a remaining balance (the written down value). Terminal depreciation is the pro-rata depreciation claimed in the year of disposal based on the number of days the asset was in use.
Pro-Rata Calculation:
In the disposal year, depreciation is calculated on a pro-rata basis. This means if the asset was used for part of the year, you claim a proportionate deduction for that period. This final adjustment is what we call terminal depreciation.
Purpose:
The idea is to fully account for the cost of the asset in your tax computations. Without terminal depreciation, there might be an unabsorbed cost remaining in the books when the asset is disposed of.
Key Point:
-
See lessSection 32 of the Income Tax Act, 1961 governs the depreciation of assets, including the pro-rata (or terminal) depreciation in the year of disposal. While “terminal depreciation” isn’t mentioned by name in the Act, the concept is inherent in the depreciation calculations applied when an asset is retired.