Where the asset is acquired in the previous year, the actual cost of the asset shall be treated as WDV.

In the context of computing depreciation, it is important to understand the meaning of the term ‘WDV’ & ‘Actual Cost’. Written Down Value or WDV of Assets - MeaningĪs per Section 32(1) of the IT Act depreciation should be computed at the prescribed percentage on the WDV of the asset, which in turn is calculated with reference to the actual cost of the assets. Therefore, depreciation rates prescribed under the Income Tax Act are only allowed irrespective of the depreciation rates charged in the books of accounts.

Depreciation under the Companies Act, 1956 is different from that of.

If opted for presumptive taxation scheme, the deemed profit is said to have considered the effect of depreciation.

That is, the taxpayer can carry forward the WDV after reducing the depreciation amount. 2002-03 and shall be allowed or deemed to have been allowed as a deduction irrespective of a claim made by a taxpayer in the profit & loss account.

You cannot claim depreciation on Goodwill and cost of land.

Co-owners can claim depreciation to the extent of the value of the assets owned by each co-owner.

The Income Tax Officer also has the right to determine the proportionate part of the depreciation under Section 38 of the Act. If the assets are not used exclusively for the business, but for other purposes as well, depreciation allowable would be proportionate to the use of business purpose.

The assets must be in use for the business or profession of the taxpayer.

The assets must be owned, wholly or partly, by the assessee.

Individual assets lose their identity under Income Tax Act as depreciation is calculated on the block of assets rather than on individual assets. Each such class of asset with the same rate of depreciation will be identified as a block of the asset. Further, the depreciation percentage within the class of assets must be considered for asset classification.

The block of assets is identified depending on its life, nature, and similar use. Intangible assets, being know how, patents, copyrights, trade-marks, licenses, franchises or any other business or commercial rights of similar nature.Tangible assets, being building, machinery, plant or furniture,.Block of assets is a group of assets falling within a class of assets comprising of:

Depreciation is calculated on the WDV of a Block of assets.

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