Depreciation rate as per companies act

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Ashishkumar Mishra (Querist)
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20 July 2012 Hi Friends,

What is the Dep.rate on Leasehold Improvement & Leasehold Land.

and also,

Is computer Software treated as Intangible Assets or in the head of Computer.

if it is treated as intangible assets then what is the Dep Rate as per companies Act on SLM & WDV Method

Thanks in Advance

Ashishkumar Mishra

Ashishkumar Mishra (Querist)
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24 July 2012 Please any one reply

CA PARTH SHAH

CA PARTH SHAH (Expert)
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28 October 2012 For leasehold land, depreciation has to be provided over the period of lease term.For leasehold improvement, the depreciation on the improvement portion has to be provided over the remaining lease term

computer software has to be treated as intangible asset and has to be amortised over the period not exceeding 10 yrs as per AS -26

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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21 July 2024 Here are the answers to your questions regarding depreciation rates under the Companies Act, 2013 for leasehold improvements, leasehold land, and computer software:

1. **Leasehold Improvements:**
- Leasehold improvements are treated as part of the building or premise leased and are subject to depreciation.
- The depreciation rate for leasehold improvements is typically based on the useful life of the improvements, which is determined by the management of the company. There is no specific rate prescribed under the Companies Act, 2013 for leasehold improvements. Companies generally estimate the useful life and depreciate them accordingly.
- It is common to use the Straight Line Method (SLM) or Written Down Value (WDV) method for depreciation on leasehold improvements, depending on the company's depreciation policy.

2. **Leasehold Land:**
- Leasehold land itself is not depreciable as per the Companies Act, 2013. Only the improvements made on the leasehold land (i.e., leasehold improvements) are depreciable.

3. **Computer Software:**
- Computer software is treated as an intangible asset under the Companies Act, 2013.
- The depreciation rate for computer software under the SLM method is typically 25% per annum. This means that each year, 25% of the cost of the software can be claimed as depreciation.
- Under the WDV method, the depreciation rate for computer software is usually 60% per annum. This is applied to the written down value of the software each year.

It's important to note that specific depreciation rates may vary based on the company's internal policies and the nature of the assets. Companies Act, 2013 provides general guidelines, and companies often have flexibility in determining useful lives and depreciation rates based on their specific circumstances and accounting policies.

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