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Depreciation rate software

06 May 2025

Dears, what is the depreciation rate charged on software as IT act.

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Rama chary Rachakonda (Master in Accounts & high court Advocate email ID:ramachary64@gmail.com voice no:9989324294) (7580 Points)
Replied 06 May 2025

Depreciation Rate on Software under the Income-tax Act The depreciation rate on software under the Income-tax Act, 1961, is as follows: -

*Computer Software*: Computer software is considered an intangible asset and is eligible for depreciation at a rate of 25% under Section 32 of the Income-tax Act. -

*Block of Assets*: Software falls under the block of assets known as "intangible assets," which includes assets like patents, copyrights, and trademarks. -

*Actual Cost*: The depreciation is calculated on the actual cost of the software, which includes the purchase price and any other costs incurred to bring the software into use.

Additional Considerations - *Written Down Value (WDV) Method*: Depreciation on software is calculated using the Written Down Value (WDV) method, where the depreciation is calculated on the reducing balance of the asset. -

*Conditions for Claim*: To claim depreciation on software, the asset should be owned by the taxpayer, used for business purposes, and the ownership should be evidenced by a valid agreement or invoice .

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prasad Nilugal ( GST Practitioner & Accounts ) (14870 Points)
Replied 06 May 2025

Before applying Depreciation ,you also check have you taken input tax credit ( ITC) on Such intangible Asset which was Capitalise in the book's of Accounts, because as per section 16(3) of the CGST Act 2017 , if you claim input tax credit , depreciation on tax component shall not be allowed, so you must. refer section 16(3) of the CGST Act, before claiming depreciation . Consider this is an addtional infomation not relevent to your query , however its very useful .