Taxation of Government Grant - Professionals - Taxation - TIK Share
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Taxation of Government Grant

Ankit Sharma


From AY 2016-17, all Government grants, except Goernment grant which is deducted from cost of depreciable asset to arrive at actual cost u/s 43, are treated as income in following manner -

a. Government Grant received for meeting expenses, should be  shown as income in the year it is received.

b. Where the Government grant is not directly relatable to the asset acquired, then, a pro-rata reduction of the amount of grant should be made in the same proportion as such asset bears to all assets with reference to which the Government grant is so received.

c. Grants relatable to Non-depreciable fixed asset have to be recognized as income over the same period over which the cost of meeting such obligations is chargred to income.

d. All other Government grants have to be recognized as income over the periods necessary to match them with the related costs which they are intended to compensate.