Long term borrowing

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Kirti Shah (Querist)
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22 May 2014 we will be availing 4 Cr loan for acquiring office premises. Pl let me know will be under grouping of long term borrowing or short term borrowing and what is current rate of depreciation under Income Tax Act as well as Comapny's Act

Kirti Shah

CA Sumit Arora

CA Sumit Arora (Expert)
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22 May 2014 Dear Kirti,

that will be treated as long term borrowing.
As far as depreciation is concerned you have to bifurcate the value of premises into land and building as there are separate rates for charging depreciation.
Depreciation rate is 10% on building, and on land depreciation rate is nil, according to the provisions of the income tax act.
Companies Act, 2013 has prescribed the useful life for the purpose of charging depreciation as against the rates which was earlier in the Companies Act, 1956.
Companies Act, 2013 has made component accounting mandatory so you are required to bifurcate the value into two parts.

Regards
Sumit Arora

Nikhil Kaushik

Nikhil Kaushik (Expert)
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22 May 2014 depends on the tenor of the loan......

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