Wdv or slm

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

30 August 2013 which method of dep. is approved by income tax act and why it is approved. meanwhile which one is better and why(W.D.V/ S.L.M.)

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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30 August 2013 In general WDV method is applicable for all the assessees. Only in cases of power generating undertakings straight line method has been prescribed.
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WDV method is better and realistic than SLM.
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Querist : Anonymous

Querist : Anonymous (Querist)

31 August 2013 reason??????????

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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03 August 2025 Which method is approved by Income Tax Act?
WDV (Written Down Value) method is the default and generally approved method under the Income Tax Act for depreciation on assets.
SLM (Straight Line Method) is only prescribed in specific cases, such as power generating undertakings and a few other exceptions.
Why is WDV method approved/preferred by the Income Tax Act?
WDV method accounts for wear and tear and the reducing value of an asset over time.
It recognizes that an asset’s economic utility decreases faster in the earlier years.
This method allows higher depreciation in early years and gradually reduces depreciation, which aligns better with actual asset usage.
It matches expenses with revenue more realistically in most businesses.
It also helps reduce taxable income more in the early years, which is often beneficial for cash flow.
Why is WDV considered better than SLM?
Realistic reflection of asset usage: Assets lose more value when new; WDV reflects that better.
Tax benefits: Higher depreciation initially means lower taxable income early on.
Financial prudence: As assets age, they often cost less to maintain; WDV depreciation aligns with this.
When SLM is preferred?
For assets like power plants, where depreciation is more uniform over the asset's life, SLM is prescribed.
Also used when companies want to show consistent expense across years for financial reporting.
Summary Table
Aspect WDV SLM
Depreciation Pattern Declining balance over years Equal amount every year
Tax Approval Generally approved method Prescribed for specific assets
Tax Benefit Higher depreciation in early years Even depreciation, less tax saving early
Realism More realistic for most assets Better for assets with uniform use

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