Depreciation on residential property used for business?

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This query is : Open

Tax (Querist)

23 March 2017 Facts of the case -

Assesse constructed a building for residential purposes in the year 2004
Cost of Land - Rs. 2.5 lacs (Purchased 10 years earlier)
Cost of Construction of Building - Rs. 24 lacs
Assesse started business in the year of 2014
Assessee started using that residential property for the purposes for business.
He used that residential property as an office.

Queries -

How to claim depreciation on same?
Should the depreciation be claimed from year AY 15-16 or from the year of construction?
At what rate should depreciation be claimed?
Depreciation should be claimed on whole property or proportionately on only the part used for business?
Depreciation should be claimed on the composite COST of Land & Building (i.e on Rs. 2650000)?

Sandeep Dharar

Sandeep Dharar (Expert)

23 March 2017 Depreciation should b calculated on the part of the building which is used for business purpose only. Depreciation should b deducted from the period since the building is used for business purpose. The rate of depreciation depends on the nature of assessee accordingly, as per income tax act the rate is 10%.

Tax

Tax (Querist)

23 March 2017 Nature of the assessee is Proprietorship Firm

Rate of Depreciation on Residential Property is 5%, right?

Sandeep Dharar

Sandeep Dharar (Expert)

23 March 2017 Nature means type of assessee, of Company then Companies Act 2013, Depreciation will b followed. You must follow Income tax rates for IT returns irrespective of nature of the assessee. No 5% is for Residential Building(complex etc), but as it is used for business hence, it should be 10%.

Tax

Tax (Querist)

23 March 2017 Ok Sir.. Thanks a lot for the help!!!!

Final question and confirmation -

Proprietorship Firm Business -

Depreciation will be provided from AY 15-16 (when the business started) as following -

Depreciation on Residential Use of Property (60% of the property used for residence) - 5%

Depreciation on Business Use of the Property (40% of the property used for business) - 10%

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