CEREBRAL HEIGHTS INSTITUTE MANAGEMENT AND COMMERCE

OF

TAX PLANNING AND MANAGEMENT

TOPIC: DEPRECIATION ON FIXED ASSET
SUBMITTED TO: SUMTI BIYANI SUBMITTED BY: ABHILASHA VIRK VIPASHA MISHRA PRATIMA DHANOTE KAPIL WAMBURKAR PRAKHAR DUBEY

CONTENTS
1.

2.
3. 4. 5.

DEFINATION. PROVISION. METHOD RATE OF DEPRECIATION. SOME IMPORTANT POINTS.

DEFINATION

FIXED ASSET:- Fixed asset is an asset held with the intention

of being used for the purpose of producing or providing goods or services and is not held for sale in the normal course of business.

DEPRECIATION:- Depreciation is an annual income tax

deduction that allows you to recover the cost or other basis of certain property over the time you use the property. It is an allowance for the wear and tear, deterioration, or obsolescence of the property.

PROVISION
Provision for allowing depreciation are contained in section 32 and are regulated under Rule 5 of the income tax rules. In order that the depreciation is allowable the following conditions must be fulfilled: Depreciable Assets. Asset must be own by assessee. Asset acquired on hire purchase system. Depreciation on lease hold property. Asset must be used for the purpose of the business or profession. Actual cost. Written down value. Block of asset. Asset acquired during previous year.

METHOD OF CALCULATING DEPRECIABLE ALLOWANCES

In income tax act depreciation will be calculated at block of asset method and rate of depreciation applicable at prescribed rate according W.D.V method. BLOCK OF ASSET Written Down Value of block of assets in the immediately preceding previous year. shall be reduced by depreciation. Add: Actual cost incurred of any assets falling within that block acquired & put to use by assesses during the previous year. LESS: Sale proceeds and other amount receivable by assesses in regard to any assets falling within that block which is sold. CLOSING BALANCE ELIGIBLE FOR DEPRECIATION LESS: Depreciation at prescribed rate. LESS: Depreciation at of prescribed rate(if assets used less than 180 days) WRITTEN DOWN VALUE

RATES OF DEPRECIATION
TANGIBLE ASSETS
i. ii. i. ii. iii. iv.

Building Residential building other boarding and hotel Office building, factory, go down Furniture Plant & Machinery Car other than those used in business of running Computers including software and books(not annual publication) Other plant & machinery Books for profession (annual publication) Ships- Ocean going ships, vessels, speed boat Aero planes- Aero engines INTANGIBLE ASSETS Know how, patents, copy right, licenses, franchises

5% 10% 10% 15% 60% 15% 100% 20% 40%

25%

SOME IMPORTANT POINTS

Depreciation is available only if the block is not empty on last last day of previous year and block having closing balance. If block having balance but block is empty then no depreciation will be charged and balance treated as short term capital loss. If the block is not empty and it is not have balance than excess sales consideration treated as short term capital gain. If any assets used during the year less then 180 days then rate of depreciation on this assets will be 50% of prescribed rate. If any assets acquired the year but not used in previous year then it will be not added in block of assets. For the calculation of 180 days period starting from the date when assets are put use till 31, march. If government provide subsidy on purchase of assets then it will be deducted from actual cost of assets.

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