With depreciation Without depreciation Savings with depreciation
Say your income before depreciation is - 100000 100000
depreciation is (A) - 30000 0
Net income after depreciation - 70000 100000
Tax assumed 40% - 28000 40000 12000
Cash Profit After tax (B) - 42000 60000
Cash flow (A+B) - 72000 60000 12000
essentially cash flow has increased because of depreciation
in simple words - depreciation amount x tax % = 30000 x 40% = 12000 tax has shielded the cash outflow
Regards
Raghavan