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CEREBRAL HEIGHTS INSTITUTE OF

MANAGEMENT AND COMMERCE

TAX PLANNING AND MANAGEMENT

TOPIC: DEPRECIATION ON FIXED ASSET

SUBMITTED TO: SUBMITTED BY:

SUMTI BIYANI ABHILASHA VIRK

VIPASHA MISHRA

PRATIMA DHANOTE

KAPIL WAMBURKAR

PRAKHAR DUBEY

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CONTENTS

1. DEFINATION.

2. PROVISION.

3. METHOD4. RATE OF DEPRECIATION.

5. SOME IMPORTANT POINTS.

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DEFINATION

FIXED ASSET:- Fixed asset is an asset held with the intentionof 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 taxdeduction 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 ofthe property.

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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.

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METHOD OF CALCULATING

DEPRECIABLE ALLOWANCES

In income tax act depreciation will be calculated at block of asset method andrate 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 anyassets falling within that block which is sold.

CLOSING BALANCE ELIGIBLE FOR DEPRECIATIONLESS: Depreciation at prescribed rate.

LESS: Depreciation at of prescribed rate(if assets used less than 180 days)

WRITTEN DOWN VALUE

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RATES OF DEPRECIATION

TANGIBLE ASSETS

Building

i. Residential building other boarding and hotel 5%

ii. Office building, factory, go down 10%

Furniture 10%

Plant & Machinery

i. Car other than those used in business of running 15%

ii. Computers including software and books(not annual publication) 60%

iii. Other plant & machinery 15%

iv. Books for profession (annual publication) 100% Ships- Ocean going ships, vessels, speed boat 20%

Aero planes- Aero engines 40%

INTANGIBLE ASSETS

Know how, patents, copy right, licenses, franchises 25%

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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 depreciationon 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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THANK YOU