Income Tax & Practices -II

Assignment - 2

By:- Mahek Somaiya - 53

 Section 32:- Depreciation

Section 32 of the Income Tax Act outlines the rules and rates for calculating
depreciation on various assets used for business or profession.

 Depreciation is a deduction allowed for the wear and tear of both tangible and
intangible assets over time.

 As per section 32 of the Income Tax Act, 1961, depreciation is allowed as

deduction on tangible assets and intangible assets owned, wholly or partly, by
the assesse and used for the purposes of business or profession.
 Classification of Depreciable Asset

Tangible Assets Intangible assets

Class –
Class –
III
Class – II
Plant Class – IV
I Furnitu
& All intangible Assets
Buildin re &
machin except goodwill
gs Fixture
ery
s
 Rates of Depreciation

Assets Rates
1)Tangible Assets
a) Class I – Building
 Residential Building 5%

 General Building 10%

Temporary Structure 40%

b) Class- II - Furniture & Fittings 10%

c) Class - III

 Motor vehicle used in business of running them on hire 30%

 Assets Rates
 Other motor vehicles 15%
Ships 20%
Aircraft 40%
Computers 40%
Books 40%
Windmill & its equipments installed after 1-4-2014 40%
Pollution control equipments 40%
Oilwells 15%
Other Plant & Machinery 15%
2) Intangible Assets
d) Class IV 25%
 Notes
It is mandatory to claim Depreciation for all assessee.

EPABX and mobile phones are not computers hence, Depreciation @40% isn’t
eligible but for UPS, Printer, scanner are eligible because they are computer's
accesories.

Depreciation is allowed even if cost is less than 5000.

 Depreciation allowed when asset is actually put to use and not ready to use.

Intangible assets includes know-how, Patent, copyrights, trademark, license,

franchises or any other business of commercial rights of similar nature but other
than goodwill of business & profession
 Methods of Depreciation

Assessee

Business of Generation &

Other Businesses
Distribution of Power

WDV / SLM WDV

1) WDV :-

 It stands for written down value method.

 Incase of WDV Block of Asset system applies .

 Block of Asset means group of Assets having same class of asset.

WDV of Block for Depreciation

 If Asset acquired but not put to use = No depreciation

 If Asset used for less than 180 days in a year = half rate depreciation

 For Balance = Full rate depreciation.

2) SLM:-

It Stands for Straight line Method.

 In this method depreciation is charged evenly across each

accounting period.

 Incase of SLM , Individual asset system applies.