Working Note format for tax
QUESTION
| ABC PRIVATE LIMITED | |
| PROFIT AND LOSS A/c | |
| Particulars | Amt |
| Sales | 500000 |
| Less | |
| Purchase | 300000 |
| Gp | 200000 |
| Less | |
| Office Exp. | 60000 |
| Intrerest | 50000 |
| Depreciation* | 60000 |
| Profit | 30000 |
| Tax @ 30% | ? |
| Profit after tax | ? |
Calculate Tax and PAT
View answer
Profit before tax=30000
Tax =30% of Profit =30%*30000=9000
Profit after tax=30000-9000=21000
Example 2
Suppose Depreciation charged in books is as per Companies Act is 60000
But Depreciation as per Income Tax Act 70000
Calculate Tax?
View answer
DIRECT METHOD
| Particulars | Amt |
| Sales | 500000 |
| Less | |
| Purchase | 300000 |
| Gp | 200000 |
| Less | |
| Office Exp. | 60000 |
| Intrerest | 50000 |
| Depreciation | 70000 |
| Taxable Profit | 20000 |
| Tax 30% | 6000 |
INDIRECT METHOD
| Particulars | Amt |
| Indirect method | |
| Net Profit | 30000 |
| Add: | |
| Exp. Disallowed | |
| Dep As Per Companies Act | 60000 |
| Less: | |
| Exp. Allowed | |
| Dep As Per Income Tax Act | 70000 |
| Taxable Profit | 20000 |
| Tax 30% | 6000 |
Normally in Companies,Indirect Method is more followed
Calculate PBT and PAT also in above case
View answer
| Particulars | Amt |
| PBT (Profit before tax) | 30000 |
| Tax @ 30% | 6000 |
| Profit after tax | 24000 |
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QUESTION
Is Depreciation shown In Tally Profit and Loss as per Companies Act or Income Tax Act?
View answer
In case of Non Company,
Depreciation shown is as per Income Tax Act (as Companies Act is not applicable)
(Refer Q1 above)
In case of Company,
We pass Entry of Depreciation as per Companies Act
Hence,In our Profit and Loss Account,Depreciation as per Companies Act is shown
However while paying taxes,we have to use Depreciation as per Income Tax Act
(Refer Q2 above)