Companies Act 2013 vs. Income Tax Act 1961: Dual Depreciation Rules Decoded

The Dual Depreciation Compliance Challenge

In Indian corporate accounting, maintaining fixed assets is complicated by two conflicting statutory frameworks. Every corporate entity is required by law to calculate and maintain two completely independent sets of depreciation schedules:

1. Financial Reporting (Companies Act, 2013): Governed by Schedule II, requiring depreciation based on the estimated useful life of individual assets with mandatory 5% residual salvage value.
2. Tax Filing (Income Tax Act, 1961): Governed by Section 32, requiring depreciation on a 'Block of Assets' basis using statutory Written Down Value (WDV) rates (e.g., 15% for general plant & machinery, 40% for computers).

Deferred Tax Asset / Liability (Ind AS 12)

The divergence between book depreciation and tax depreciation creates timing differences that must be calculated and recorded as Deferred Tax Assets (DTA) or Liabilities (DTL). Doing this in disconnected spreadsheets leads to substantial audit adjustments.

Relaso Fixed Asset Depreciation Software automatically computes dual depreciation books simultaneously, generating clean tax-ready schedules and instant DTA/DTL journal vouchers.