Depreciation rates chart as per Income Tax Act for 2013-14

Depreciation Rates Chart as per Indian Income Tax Act, 1961-

DEPRECIATION (BASIC POINTS)

• Assesse must be owner of the asset & used in business or profession.
• He may not be registered owner of the asset.
• Here only WDV method is used under Block of assets concept, unless block becomes empty or WDV becomes 0.
• In case of amalgamation, merger etc., no. of days used to taken to cal. depreciation.
• Depreciation Is charged if asset can be used, i.e “Ready to use”, whether actually used or not.
• Half dep. If used for less than 180 days & no dep. In year of sale of asset.
• Dep. Of 5% is charged on residential buildings used for business purposes.
• Only actual money received on sale of asset is deducted in block, not the benefits which can’t be converted in money.
• Depreciation is allowed even if it is not claimed by the assesse.
• Dep. Is cal. Only on asset. Asset is one which can give future benefits (irrespective of the amt.)
• Value of asset includes purchase cost + costs incurred to make machinery ready to use + interest paid on loan taken to purchase machinery, but only int. paid before machinery was put to use.
• If dep. Is not fully absorbed, it can be set off & carry f/w. to infinite no. of years & continuing of business is not important/required for it.
• Additional Depreciation-

1. Available only if assesse fulfills three conditions-

a) Assesse must be engaged in manufacturer/production of an article or thing.

b) Only available in first year of purchase.

c) It should be eligible plant & machinery.

d) It should be not building, furniture & old P&M.

e) Rate- 20% p.a , if less than 180 days, 10 % p.a.

f) Eligible P&M is one which is not ships & aircraft ,mach. Used outside india, machinery in office premises & furniture and buildings, power generating unit, mach. With 100% dep.

• Dep. Of asset under-

Lease-

a) If lessee has done a capital exp. in a building, he can claim dep. On that part.

Otherwise, only lessor can claim dep. On his assets leased.

b) Exception- If lessee in case of financial lease can exercise the rights of the owner not on behalf of lessor but in his own right, dep. is available to lessee.

Hire-purchase-

a) Seller has the right to claim depreciation unless-

• Ø H.p agreement gives right to hirer over asset for all practical purposes. +
• Ø Hirer has paid all installments to seller.

Then he can claim dep.

DEP. IN CASE OF POWER GENERATING UNITS

• SLM-

1. If PGU sold below WDV, the loss will be treated as terminal depreciation.
2. If asset sold over & above WDV, surplus is balancing charge.
3. If asset sold above cost of asset, the over & above amount will be STCG.

• WDV-

1. If PGU sold below WDV, treated as loss & sent to P/L ac.
2. No Balancing charge & STCG here.
3. Any profit is simply taxable as business profit.

• Notes related to above 2-
  • Ø All rules of 180 days are still applicable.
  • Ø If asset sold in P.Y in which it was put to use, then no T. Dep. & B.C, any loss= STCL & profit= STCG.

Characteristics which a fixed asset should have-

• Ø Asset should be able to give future benefits.
• Ø It is not a routine expenditure.
• Ø Cap. Exp. improves the existing capacity of the asset.
• Ø It should be non-recurring in nature.
• Ø Amount of the exp. & its mode of payment cannot decide the nature of the asset.

Eg.- Fluorescent lights installed for the 1^st time in office is a capital exp. but all subsequent replacement of lights is a revenue expenditure.

That's it from my side. Hope you liked this chart on Income Tax Act, 1961 Depreciation Rates. If you are planning to to save some tax & a lot of money, then this will surely help you a lot.

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