Depreciation on asset partially used for personal purposese

If an asset like car is purchased for business purpose is also being used for personal purpose to the extent of 20 % . Please tell me:

1. How much depreciation will be allowed?

2. What will be the written down value for suceeding year i.e. whether WDV will be after deducting whole depreciation (15%) or only the amount of depreciation allowed will be deducted?

Replies (8)

Depreciation to the extent of only 80% of the total depreciation on tha car will be allowed in assessing teh tax liability.  The remaining 20% will be disallowed.  Full depreciation will be deducted from the WDV of the asset and balance will be c/f

Please give me the provisions in IT Act or case laws related to this topic

There is no need of a case law.  Section 28 of the I-T Act clearly states any expenditure incurred wholly & exclusively for the purpose of business/profession is allowable as a deduction in computing the taxable profits.

So 20% depreciation incurred for personal purposed is not allowable.

I want to know that whether it is given somewhere in law that in calculating WDV for next year the whole depreciation will be deducted and not only that part which has been allowed for tax purpose .

There is not need of this to be given by law.  If any expense is incurred fro personal purposes then it wiill surely be disallowed in the assessement.  So if 20% of the car use is for persona pusposes every eyar then depreciation to that extent will be disallowed ever year.  It is not that only in the first eyar depreciation will be disallowed & from teh subsequent year it will be disallwoed.  Also in the subsequent it is proved that the use of car is say about 30% for personal puspose then 30% of the full depreciation will be disallowed.

What if Depreciation is claimed at excess rate and Ao diasllows, (asset is used only for business purpose) can the depreciation disallowed be added back to asset in next year

Dear all

It is the practice of assessee to claim depreciation as per the rates admissible and as per the provisions of section 32 of the Income-tax Act, 1961 and while filing return of income - in the computation of totoal income - 20% or 30%  of depreciation as well as mainteance expenses also of the car as the case may be towards personal usage is disallowed.  The w.d.v. will be carried to the subsequent year as per books of account but not the value after deducting the disallowed portion of the depreciation.

Best Wishes

Sathikonda

Please advice, where can i show this add back in ITR 4

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