how can depreciation save taxes?
Depreciation can save taxes by reducing a company's taxable income. The amount of depreciation recorded on a company's financial statements is subtracted from its taxable income, effectively lowering the amount of taxable income the company reports to the government. For example, if a company has Rs.100,000 in taxable income and Rs.20,000 in depreciation, the company would only report Rs.80,000 in taxable income to the government. This lower taxable income results in a lower tax liability for the company, which can help save on taxes. It is important to note that depreciation is a non-cash expense, which means that the company does not actually receive a cash benefit from recording depreciation. However, the reduction in taxable income can help lower a company's tax bill, which can result in a significant savings over time. Additionally, depreciation provides a more accurate picture of a company's financial performance by better matching expenses with revenue, which c...