Dep rate???
This query is : Resolved
19 June 2012
hello... as per revised sch vi computer software are classified under intangible asset... so now whats the rate of dep for computer software ? 25% or 60%
20 June 2012
60% can be considered for income tax purpose as per appendix I { sl. no. III(5)}of rule 5 of IT Rules,1962.
21 July 2024
Under the revised Schedule VI of the Companies Act, 1956 (now Companies Act, 2013), computer software is classified as an intangible asset. Here’s how depreciation for computer software is treated under the Companies Act, 2013:
### Depreciation Rate for Computer Software:
1. **Companies Act, 2013:**
- Computer software is considered an intangible asset.
- The depreciation rate for intangible assets including computer software is prescribed under **Schedule II** of the Companies Act, 2013.
- As per Schedule II:
- The depreciation method for intangible assets is generally the **straight-line method** unless a different method of depreciation is justified.
- The useful life for intangible assets should be determined based on factors such as the expected utility of the asset and the entity's past experience with similar types of assets.
- There is no specific rate mentioned like 25% or 60%. The rate is determined based on the useful life and is applied on the cost of the software.
2. **Accounting Treatment:**
- Computer software should be capitalized at its cost of acquisition or development, including any directly attributable costs to bring the software to its working condition.
- Depreciation should be charged systematically over its useful life, starting from the date it is ready to use.
### Practical Application:
- **Determination of Useful Life:** The useful life of computer software can vary depending on factors such as technological obsolescence and future economic benefits.
- **Depreciation Calculation:** If the useful life is determined to be 3 years, for instance, the depreciation rate would be calculated as 1/3rd of the cost of the software each year.
### Conclusion:
In summary, under the Companies Act, 2013, computer software is treated as an intangible asset, and depreciation is calculated based on its useful life. There is no fixed percentage rate like 25% or 60%; instead, the rate is based on the useful life determined for the software asset. It’s important to apply the appropriate depreciation method and useful life in compliance with the accounting standards and Schedule II of the Companies Act, 2013. For specific cases, consulting with a professional accountant or tax advisor would provide tailored advice based on your company's circumstances.
### Depreciation Rate for Computer Software:
1. **Companies Act, 2013:**
- Computer software is considered an intangible asset.
- The depreciation rate for intangible assets including computer software is prescribed under **Schedule II** of the Companies Act, 2013.
- As per Schedule II:
- The depreciation method for intangible assets is generally the **straight-line method** unless a different method of depreciation is justified.
- The useful life for intangible assets should be determined based on factors such as the expected utility of the asset and the entity's past experience with similar types of assets.
- There is no specific rate mentioned like 25% or 60%. The rate is determined based on the useful life and is applied on the cost of the software.
2. **Accounting Treatment:**
- Computer software should be capitalized at its cost of acquisition or development, including any directly attributable costs to bring the software to its working condition.
- Depreciation should be charged systematically over its useful life, starting from the date it is ready to use.
### Practical Application:
- **Determination of Useful Life:** The useful life of computer software can vary depending on factors such as technological obsolescence and future economic benefits.
- **Depreciation Calculation:** If the useful life is determined to be 3 years, for instance, the depreciation rate would be calculated as 1/3rd of the cost of the software each year.
### Conclusion:
In summary, under the Companies Act, 2013, computer software is treated as an intangible asset, and depreciation is calculated based on its useful life. There is no fixed percentage rate like 25% or 60%; instead, the rate is based on the useful life determined for the software asset. It’s important to apply the appropriate depreciation method and useful life in compliance with the accounting standards and Schedule II of the Companies Act, 2013. For specific cases, consulting with a professional accountant or tax advisor would provide tailored advice based on your company's circumstances.
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