 # difference between Income tax depreciation and book depreciation

I have a seminar on the topic " Difference between Income tax depreciation and Book depreciation". Please help me by giving information on that topic.

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Income Tax depreciation is provided according to income tax act,1961 which allows the entities deduction and allowances from paying tax while the same is not available on book depreciation. For calculating the book depreciation we follow the depreciation methods already provided like Straight Line Method, Written Down Value Method, etc. but for calculating the income tax depreciation you need to follow the rules prescribed by the income tax authorities. Income Tax depreciation may be more or less than the book depreciation. There are many things in which income tax authorities allow 100% depreciation in the first year itself but the same may be depreciated at different rates in the book depreciation.

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**Depreciation** Depreciable assets are long-term tangible assets that are finite in their usefulness. In contrast, amortizable assets are long-term intangible assets that are finite in their usefulness. Depreciation and amortization are almost identical -- both are used to record the gradual depletion of an asset's value as it is used up in the business's operations. For each time period of the asset's useful lifespan that passes, a mathematical formula is used to calculate a portion of that asset's value to be deducted as expense, continuing until the asset's value is exhausted and its usefulness at an end. Different formulas produce different expense sums in each time period and thus different patterns of value loss. **Book Depreciation** Book depreciation refers to the business's depreciation expense as recorded on its financial statements and the depreciation method used to calculate that expense. No limitation exists on what methods a business can use so long as the method is suited to the asset. Book depreciation often produces much different results from tax depreciation due to the number of depreciation methods available and the fact that the business is responsible for estimating the useful lifespan of its assets. For example, one business may estimate a \$200,000 machine to possess four years of usefulness and deduct \$50,000 in each year as depreciation expense while another may estimate eight years usefulness and deduct \$25,000 in each year as depreciation expense.

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Income Tax depreciation is provided according to income tax act,1961 which allows the entities deduction and allowances from paying tax while the same is not available on book depreciation. For calculating the book depreciation we follow the depreciation methods already provided like Straight Line Method, Written Down Value Method, etc. but for calculating the income tax depreciation you need to follow the rules prescribed by the income tax authorities. Income Tax depreciation may be more or less than the book depreciation. There are many things in which income tax authorities allow 100% depreciation in the first year itself but the same may be depreciated at different rates in the book depreciation. You need to calculate the income tax depreciation at the time of filling the tax return while you calculate the book depreciation at the end to financial year to match the costs against revenue.

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