Depreciation

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Dhaval (Querist)

29 August 2011 Where is written in companies act that assessee is at free to choose any method of providing depreciation?
Please specify particular section

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

29 August 2011 Act is providing the rates under Straight line method and written down value method.

Dhaval

Dhaval (Querist)

31 August 2011 Dear sir,
I want to know exact section which says assessee is at free to use any method of depreciation i.e SLM / WDV

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

21 July 2024 Under the Income Tax Act, 1961, the method of depreciation that can be used by an assessee (taxpayer) is primarily governed by Section 32. Here's the relevant information:

### Section 32 of the Income Tax Act, 1961

Section 32 deals with the depreciation allowance that can be claimed on tangible assets and intangible assets used for business or profession. It specifies the following:

1. **Allowance for depreciation:** Depreciation is allowed as deduction from profits and gains of business or profession.

2. **Method of depreciation:**
- Section 32(1) allows depreciation on tangible assets, including buildings, machinery, plant, furniture, etc.
- Section 32(1)(i) allows depreciation on intangible assets, including know-how, patents, copyrights, trademarks, licenses, franchises, etc.

3. **Choice of method:**
- Section 32(1) does not specify a particular method (SLM or WDV). It gives the taxpayer the freedom to choose the method of depreciation, either Straight Line Method (SLM) or Written Down Value (WDV) method.
- The choice of method should be consistently followed from year to year and should reflect a true and fair view of the depreciation of the asset.

4. **Conditions:**
- The method chosen should be applied consistently for all assets of the same class or category.
- Changes in the method of depreciation are permissible, but adjustments may be required to ensure the depreciation is correctly computed and accounted for.

### Summary
Section 32 of the Income Tax Act, 1961, empowers the assessee to choose between the Straight Line Method (SLM) and the Written Down Value (WDV) Method for computing depreciation on assets used for business or profession. This flexibility allows businesses to adopt the method that best suits their financial reporting and tax planning needs, provided it is applied consistently and in accordance with the provisions of the Act.

If you need more specific details or have further questions related to depreciation methods, feel free to ask!

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