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)

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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

  1. Practical Income Tax
  2. Income Tax for Audit Cases (Non Co)
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CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides GST and Tax E-filinf training in Delhi. Register now.
  • akash chandran's image
    Our teacher taught us that in order to claim additional depreciation on plant and machinery by power generation unit  it must be in WDV method and here you says that it must follows SLM method?
    View answer
  • milinddeoghare@gmail.com's image
    milinddeoghare@gmail.com
    Aug. 26, 2016, 9:56 a.m.

    Dear sir

    can i get pdf notes of ipcc income tax and indirect tax

     

    regards

    Milind

     

    View answer