Select Your Location
Depreciation means a reduction in the real value of tangible used
by the assessee in the course of business or profession. Depreciation can be
claimed as a deduction by the assessee for investing in assets like furniture,
plant & machinery or other such tangible assets, for the previous year.
The concept of depreciation was introduced under the Income Tax
Act for writing off the cost of an asset over its useful life. Depreciation is
a compulsory deduction that can be claimed by a taxpayer. There are different
for calculating depreciation on assets, the
most popular ones being – Straight-line method (SLM) and the Written Down Value method (WDV).
Table of Contents
Section 32 of the Income Tax Act, 1961 regulates & governs the depreciation in respect of:
It is pertinent to
mention that these assets must be used in connection
with business or profession and should be
owned, either wholly or partly, by the assessee.
Allowance of depreciation is calculated as per the WDV method with
exception of an undertaking that is engaged in the generation of power or distribution of
Depreciation allowance is apportioned in case of amalgamation or
demerger of two companies. Such allowance is proportionate between an
amalgamated and amalgamating company in case of amalgamation. And in the case
of demerger, it is proportioned between demerged and the
As per the Accounting Standard-19, in the case
of financial lease transactions, the right to
claim depreciation is allowed to lessee as he exercises such rights in the
capacity of the owner.
Following are the different rates of depreciation depending upon
the class of assets as made applicable with effect from 01.04.2017:
Also, Read: Methods of Business Valuation in India.
were the earlier rates of depreciation that prevails before amendment dated 1st
The method for calculating the depreciation can vary as per the
class of assets. The useful life of the assets also varies as per the different
classes of assets. Calculation of depreciation differs as per accounting &
taxation purpose based on asset-type and
industry in which such asset is being used.
Following are the methods for calculating depreciation:
Written Down Value
As per the Income Tax Act, 1961, written down value is calculated
based on the actual cost of an asset.
Cost of an asset = Written Down Value
Down Value = Actual Cost – Depreciation Allowed.
As per section 32 of the Income Tax Act, 1961, depreciation shall be
calculated at the specified rate of percentage on written down value.
Assessee can avail the deduction of depreciation only if he
satisfies the following conditions:
Read More: Asset Purchase Agreement sample Format.
"Savvy Midha holds the degrees of Bachelor of Commerce(honors), LL.B and Company Secretary. She is an experienced Legal and Financial writer with expertise in research, drafting, and copy-writing."
Black money has been the subject of heated political debate in India for a long time. Successiv...
The Apex Court pronounced a judgement in the case titled Tata Motors Vs The Brihan Mumbai Elect...
Since economies are moving towards digitalisation and making it feasible to conduct transaction...
The Alternative Investment Funds (AIFs) Pro-rata and Pari-Passu Rights Proposal Consultation Pa...
The Financial Action Task Force, i.e. FATF (the Force), is the global money laundering and terr...
Advance tax refers to the payment of the tax liability before the end of the relevant financia...
On 11.12.15, the Hon’ble Delhi High Court (HC) pronounced a landmark judgement in the case ti...
Money laundering can be defined as the process of illegal concealment of the origin of money ob...
Every assessee in India is obligated to file an income tax return and make the timely payment o...
In the recent past, India has seen burgeoning demand for internet and smartphones. The rapid ri...
Section 13 of the Companies Act, 2013 read with rule 29 of Companies (Incorporation) Rules, 2014 contains the proce...
23 Apr, 2020
Introduction Nominee Director is a director appointed by the financial institutions or banks in the Board of Direct...
24 Nov, 2019
Red Herring Top 100 Asia enlists outstanding entrepreneurs and promising companies. It selects the award winners from approximately 2000 privately financed companies each year in the Asia. Since 1996, Red Herring has kept tabs on these up-and-comers. Red Herring editors were among the first to recognize that companies such as Google, Facebook, Kakao, Alibaba, Twitter, Rakuten, Salesforce.com, Xiaomi and YouTube would change the way we live and work.
Researchers have found out that organization using new technologies in their accounting and tax have better productivity as compared to those using the traditional methods. Complying with the recent technological trends in the accounting industry, Enterslice was formed to focus on the emerging start up companies and bring innovation in their traditional Chartered Accountants & Legal profession services, disrupt traditional Chartered Accountants practice mechanism & Lawyers.
Stay updated with all the latest legal updates. Just enter your email address and subscribe for free!