Depreciation under income tax

Tax queries 156 views 3 replies

Hi guys, I've a query and was wondering if any of you could help me out. I'm building a website which will be selling digital content like articles on a monthly subscripttion. Now, my query is whether the cost of development (salary expense) be capitalized and subsequently depreciated at the rate of 25% under the IT act 1961. For instance, I hire one developer and pay him Rs.1 lakh salary per month. Can I capitalize this cost for a period of 6 months (the web development period) and claim depreciation from the 7th month onwards?

Also, after 6 months I do intend to put the product to market but on a beta launch basis. The product will continue to undergo development after beta and many new features will be progressively added to it. Should this new feature or product development cost be capitalized and claimed as a deprecation charge instead of writing off the entire salary expenditure to P&L?

I'd be grateful if someone can help me out here. Thanks

Replies (3)
Salary can be capitalised.. but no other deduction shall be claimed again as salary expense.

So you're saying I can capitalize salaries even if the asset is put to use as long as I'm not charging the same expense off to the P&L. Is my understanding correct?

As per my opinion, it can be capitalised since salaries are incurred for the development of the asset.

it may also be noted that, salary cost is towards development of the asset, but not maintenance.


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