Puneet Taneja
Quick Summary
Depreciation is an allowance on capital assets acquired and put to use and not an expenditure unlike repairs to machinery, plant, or furniture. It need not be incurred by the assessee during the previous year. The depreciation allowance is calculated on the assets of the assessee as per the methods
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FAQ :
Depreciation allowance is a deduction permitted on capital assets that are owned and used for business or professional purposes. It is not considered an expenditure but rather an allowance calculated on the assets as per the methods and rates prescribed by income tax law.
Depreciation is allowed on tangible assets (like buildings, machinery, plant, or furniture) and intangible assets (such as know-how, patents, copyrights, or trademarks) that are owned, wholly or partly, by the assessee and used for their business or profession.
Depreciation is generally allowed as a deduction based on the written down value (WDV) of the block of assets, at rates specified in the Income Tax Rules. However, for undertakings generating or distributing power, depreciation can be calculated on the actual cost using the straight-line method (SLM) or WDV method.
If an asset is acquired and used for less than 180 days in a previous year, the depreciation allowance is restricted to 50% of the normal amount for that year. The remaining 50% can be claimed in the following year.
Yes, if the business profits are less than the depreciation allowance, the shortfall or unabsorbed depreciation can be added to the depreciation allowance for subsequent years and carried forward.
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