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Dep rates in sch.2 of co.act 13 -query

13 March 2015

In file section there are various files which have mentioned rates as per SLM and WDV according to useful life. But how this rates can be applied if we are using assets for earlier years also??

My query is how to apply transitional provisions in case of SLM and WDV method??

I have a building purchased in 2000 for Rs. 1000000

WDV as on 01.04.14 is Rs.700000

Useful life is 30 years out of which 13 years have been elapsed.

rate given in chart is 3.17% if useful life is 30 years as per SLM.

Please explain whether i can apply 3.17% rate for depreciating the asset???

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3 Replies

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 13 March 2015

Dear Parul,

Work out WDV of the asset as per new rate as if the rate being applied from very beginning.

Compare such WDV with the WDV as per books on April1,2014.Credit/debit excess/short depreciation to P&L..

From FY 14-15 charge dep as per new rates...

CA Parul Saxena (CA) (8426 Points)
Replied 13 March 2015

mr. Saurabh please carefully read the amendments then reply

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 13 March 2015

Sorry...now Corrected

Transitional Provisions

From the date schedule-II comes into effect, the carrying amount of the asset as on that date:

Shall be depreciated over the remaining useful life of the asset as per schedule-II
After retaining the residual value, shall be recognized in the opening balance of retained earning where the remaining useful life of an asset is Nil.

For Example

A Company acquired a building at accost of Rs. 10 Crore. The Company was depreciating the building according to schedule XIV SLM rate i.e. 1.63%. Now In August 2013 Schedule-II was introduced via the companies Act 2013 in which the useful life specified is 30 year.

If the building is acquired on 01/04/2000

Depreciation charges till FY 2012-13, depreciation on SLM Basis for 13 year

Rs 10Crore X1.63%X13 Year=Rs.21190000/-

Carrying Value=10 crore-2.11 Crore=7.88Crore approx.

Now the carrying value as on 01 April 2013 will be depreciated over the remaining useful life of the asset as per schedule II of the companies Act 2013. The remaining useful life is 17 year (30-13)

So annual depreciation to be charged to the profit and loss account from FY 2013-14 would be Rs7.88 crore/17= Rs.46.35 Lakhs