Classification of software

Dear Friends,

 

Tally software purchased for Rs.15000/-

 

Can the same be depreciated at 60%,

or is it covered as "license" eligible for 25% depreciation,

or can it be written off as an expense, since the license validity is for 1 year only?

 

Please revert.

Replies (4)

AS PER MY OPINION

 

TALLY SOFTWARE CAN BE USED ONLY FOR 1 YR.

 

SO, IT HAS TO BE WRITTEN OFF AFTER 1 YR.

 

AND SHOLD NOT BE SHOWN AS FIXED ASSET, AS ITS LIFE IS ONLY ONE YEAR

SO, THERE SHOULD BE NO QUESTION OF DEPRECIATION

I think Tally software is a computer software ,so according to  Income Tax Act, it should be depreciated at 60 % of wdv.

"COMPUTER SOFTWARE" means any computer programme recorded on any disc,tape,perforated media or other information storage device. for more info you may click on https://finmin.nic.in/the_ministry/dept_revenue/revenue_headquarters/cbdt/miscell/newappen1.pdf

and so far annual updation charges are concerned, they can be treated as expenses.

No,

 

Tally software should be capitalises as a Fixed asset and Depreciation should be charged @ 60%thereon.

 

There is a difference between Software itself and license to use that software. License fees if periodic charges to be payable to vendor for keep running software with latest features and functions. U have to answer what happens if the licence period expired, did u go to purchase new software or pay the license fees and get the license renewed. Definately u will pay the license fees because cost of software is much more higher than the license fees thereon. It is not affordable for anyone to purchase again new software beacuse of expiry of license period. License fees should be charged over revenue over the period for which it is paid. Unamortised portion of license fees should be shown as deffered revenue expenditure under loans and advances

 

Regards,

 

manoj

No,

 

Tally software should be capitalises as a Fixed asset and Depreciation should be charged @ 60%thereon.

 

There is a difference between Software itself and license to use that software. License fees if periodic charges to be payable to vendor for keep running software with latest features and functions. U have to answer what happens if the licence period expired, did u go to purchase new software or pay the license fees and get the license renewed. Definately u will pay the license fees because cost of software is much more higher than the license fees thereon. It is not affordable for anyone to purchase again new software beacuse of expiry of license period. License fees should be charged over revenue over the period for which it is paid. Unamortised portion of license fees should be shown as deffered revenue expenditure under Current Assets and loans and advances.

 

Regards,

 

manoj

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