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Depreciation
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- 2. WHY DEPRECIATION ISALLOWEDWHY DEPRECIATION IS ALLOWED To arrive at real business profit.To arrive at real business profit. To determine the book value of assetTo determine the book value of asset in a given period of time.in a given period of time. To know the real position of assets inTo know the real position of assets in order to arrange for its replacementsorder to arrange for its replacements or renewal after a period of time.or renewal after a period of time.
- 3. WHEN AN ASSESSEECAN CLAIMWHEN AN ASSESSEE CAN CLAIM DEPRECIATION?DEPRECIATION? Asset should be owned by theAsset should be owned by the assessee.assessee. Asset should be used for the purposeAsset should be used for the purpose of business or profession.of business or profession. Asset should be used during theAsset should be used during the current previous year 2012 – ’13.current previous year 2012 – ’13. Depreciation can be claimed forDepreciation can be claimed for tangible and intangible assets.tangible and intangible assets.
- 4. BLOCK OF ASSETSBLOCKOF ASSETS It refers to those assets, which comes under the same category with the same rate of depreciation. Example Tangible assets with same rate of depreciation will be considered as a block. Intangible assets with same rate of depreciation will be considered as block. AssetsAssets Rate of DepreciationRate of Depreciation Buildings 10 Plant & Machinery 25 Patents (Purchased After 1-4-98) 25
- 5. METHODS OF CALCULATINGMETHODSOF CALCULATING DEPRECIATIONDEPRECIATION Block of Assets.Block of Assets. Actual Cost Basis.Actual Cost Basis. Written Down Value BasisWritten Down Value Basis
- 6. RATES OF DEPRECIATIONFORRATES OF DEPRECIATION FOR TANGIBLE & INTANGIBLE ASSETSTANGIBLE & INTANGIBLE ASSETS Tangible Assets Buildings Building used for Residential Purpose – 5% Building – Water Supply Project – 100% Building other than above Two – 10% Furniture & Fittings – 10% Plant & Machinery – 15% Car after 01/04/1990 – 15% Aeroplanes – 40% Buses, lorries and taxies – 30% Computers (for Business point of view) – 60% Books – Annual publication / Give it to business or profession – 100% Publication of books other than business – 60% Ships – 20%
- 7. TREATMENT FOR INTANGIBLETREATMENTFOR INTANGIBLE ASSETSASSETS In Tangible Assets If Expenditure Incurred Before 1-4-98 (Purchases Or Acquisiiton) If Expenditure Incurred After 1-4- 98 (Purchases Or Acquisiiton) Patents / copy rights and other assets 1/4th is allowed 25% Depreciation is allowed Technical know-how a. Usually 1/6th is allowed. b. If know-how is developed in Indian Laboratory or Institution – 1/3rd is allowed. 25% Depreciation is allowed
- 8. POINTS TO BECONSIDER TOPOINTS TO BE CONSIDER TO CALCULATE DEPRECIATIONCALCULATE DEPRECIATION Depreciation = Value as on 31-03-2013 * Rate of Depreciation. It is allowed on both tangible and intangible asset provided intangible asset is acquired on or after 1st April 1998. If any asset is used for less than 180 days in the current previous year then 50% of the actual amount of depreciation should be allowed as deduction. If an asset is used for 180 days or more full amount of depreciation should be allowed. No depreciation is allowed if an asset is sold in the current previous year. Depreciation = Value as on 31-03-13 * Rate * 50%
- 9. POINTS TO BECONSIDERED TO CLAIMPOINTS TO BE CONSIDERED TO CLAIM ADDITIONAL DEPRECIATIONADDITIONAL DEPRECIATION The assessee must be engaged in the production orThe assessee must be engaged in the production or manufacturing of any article belonging to priority or non-manufacturing of any article belonging to priority or non- priority sector items.priority sector items. It is available of new P&M acquired & installed after 31It is available of new P&M acquired & installed after 31stst March 2005.March 2005. It is not available for old P&M.It is not available for old P&M. It is not available for assets like building, furniture, ships,It is not available for assets like building, furniture, ships, aircrafts, office appliances or road transport vehicles.aircrafts, office appliances or road transport vehicles. If any P&M is used in India or outside India before itsIf any P&M is used in India or outside India before its installation, such P&M cannot claim additionalinstallation, such P&M cannot claim additional depreciation.depreciation. Any P&M installed in office premisies, residentialAny P&M installed in office premisies, residential accommodations and guest houses cannot claim additionalaccommodations and guest houses cannot claim additional depreciation.depreciation.
- 10. POINTS TO BECONSIDERED TO CLAIMPOINTS TO BE CONSIDERED TO CLAIM ADDITIONAL DEPRECIATIONADDITIONAL DEPRECIATION The assessee must be engaged in the production orThe assessee must be engaged in the production or manufacturing of any article belonging to priority or non-manufacturing of any article belonging to priority or non- priority sector items.priority sector items. It is available of new P&M acquired & installed after 31It is available of new P&M acquired & installed after 31stst March 2005.March 2005. It is not available for old P&M.It is not available for old P&M. It is not available for assets like building, furniture, ships,It is not available for assets like building, furniture, ships, aircrafts, office appliances or road transport vehicles.aircrafts, office appliances or road transport vehicles. If any P&M is used in India or outside India before itsIf any P&M is used in India or outside India before its installation, such P&M cannot claim additionalinstallation, such P&M cannot claim additional depreciation.depreciation. Any P&M installed in office premisies, residentialAny P&M installed in office premisies, residential accommodations and guest houses cannot claim additionalaccommodations and guest houses cannot claim additional depreciation.depreciation.