Insurence claim for Replacement of Asset

[Dinesh Sagade]

What will be the tax treatment for the insurance claim received for the replacement of asset damaged along with the claim received to compensate the loss due to damage ?

[YAGAY andSUN]

If you had aviled the benefit of  CENVAT credit on such assets, then, in this scenario you would have to reverse it proportionately by deducting the depreciation @ 2.5% per quarter.

[Guest]

Under VAT Act and Rules, the VAT input credit availed should be reversed on prorata basis.  Normally, input tax credit is availed over a period of 3 years. The rates will be 50% during first year, balance 50% in the second and third year.  If the loss is during the third year 25% of the input credit can be reversed.  Incase it has already been adjusted, it should be paid back to the Governmnet.

Thanks and Regards

 

R USHA

[Dinesh Sagade]

Thanks for your opinions.... bur I was expecting the opinions fron Income Tax point of view...taxability of the insurance claim received for Replacament of asset & that received towards the loss of asset damage.

AI Summary

Guidance Sought on Taxability of Insurance Claim for Asset Replacement and Loss Compensation Under Income Tax Rules An individual inquired about the tax treatment for an insurance claim received for replacing a damaged asset and compensating for the loss. One respondent advised reversing CENVAT credit proportionately if it was availed, with depreciation deducted at 2.5% per quarter. Another suggested reversing VAT input credit on a prorated basis, typically over three years, and repaying any adjusted credit to the government. The inquirer clarified they sought guidance from an income tax perspective regarding the taxability of the insurance claim for asset replacement and loss compensation.