Depreciation as per Income Tax Assignment

In Income Tax,

Dep is not calculated on basis of Number of Days

Either full Depreciation is calculated or Half Depreciation as shown below

If asset is put to use for 180 days or more in the year of purchase, then full depreciation

If asset used for less than 180 days,  half depreciation

If asset purchased and used on last day of the year,still half depreciation will be available

Learn More here

http://www.teachoo.com/214/65/Depreciation-Method/category/Depreciation-Computation-as-per-Income-Tax/

Concept of Block of Assets and Depreciation Rates

There is concept of block of assets, all assets of same type treated as one Block and depreciation on them calculated together.

Different Block of Assets and their Rates of Depreciation are

1. Building(5% Residential,10% Commercial,100% Temporary or for Developing Infrastructure)

2. Furniture & Fittings 10%(It includes Electrical Fittings also)

3. Intangible Assets 25%(Patents/Trademarks/Knowhow/Patent/License)

4, Plant and Machinery (15%,30%,40%,80%,100%),

Plant and Machinery includes

• Motor Cars on Hire 30%
• Motor Cars(Others) 15%
• Computers 40%
• Books Annual Publications/Library Business 100%
• Books (Others) 60%
• Rollers/Rolling Mills 80%
• Pollution Control Equipment 100%

General Rate on plant and machinery is 15%

Example 1:-

In 2014-15  Company purchased  the following assets

How Many Block of Assets

Example 2:-

Continuing previous question, Suppose in 2015-16, Following Assets Were Purchased

Now how many blocks of Assets

Compute Depreciation in 2015-16

SALE OF ASSETS

In this Case,

If all the assets in a Block Sold

Block Cease to Exist.Hence No Depreciation Charged.Short Term Capital Gain/ Loss Computed

If Some Assets Exist in Block,

Depreciation is Computed on Remaining Value(Opening+Purchase-Sales) if any No Capital Gain/Loss is Computed

Example 3 :-

Continuing previous question, Suppose in 2016-17, Car and Machine 1 Sold for 200000 and 350000 respectively 

Example 4:-

Resolve Q1 assuming additional depreciation also available

Additional Depreciation available only on Machines and not on other asset

For Machine 1, full Additional Depreciation will be available but for Machine 2, only 10% will be available