Depreciation Computation as per Income Tax

Income Tax
PGBP Income

We know that there are 2 methods of depreciation

1 .WDV Method (Written down Value Method)

2 .SLM Method (Straight Line Method)

WDV Method

Suppose Asset Value is 5000 and Depreciation Rate is 10% WDV.

Depreciation will be computed as follows

 Particulars Year 1 Year 2 Year 3 Opening Value 5000 4500 4050 Less Dep 10% 500 450 405 Closing Value 4500 4050 3645

Hence Closing Value of One Year becomes opening Value of Next Year on which Depreciation is calculated

SLM Method

EXAMPLE

Suppose Asset Value is 5000 and Depreciation Rate is 10% WDV.

Depreciation will be computed as follows

 Particulars Year 1 Year 2 Year 3 Opening Value 5000 4500 4000 Less Dep 10% 500 500 500 Closing Value 4500 4000 3500

Hence,depreciation value is same every year in SLM Method

#### Depreciation Method in Income Tax

Normally WDV Method Used

In Income Tax, Depreciation is calculated as per WDV Method(Written Down Value Method)

---------------------------------------------------------------------------

SLM Method (Straight Line Method) in Some Cases

However for Power Generation and Distribution unit  only SLM Method is used which we will study late r

Lets study WDV Method first in detail

Get live Maths 1-on-1 Classs - Class 6 to 12