Navigating Depreciation Regulations: Income Tax Act Insights

Depreciation Essentials: Represents the gradual asset value reduction over time. Legitimate business expense under the Income Tax Act. Divergent Calculations: Methods vary between the Income Tax Act and Companies Act 2013. May result in differing depreciation amounts in financial records and tax returns.

Block of Assets Concept: Grouping assets with similar depreciation rates. Gross Block: Total asset value at the year's start; Net Block: Value after depreciation deduction. Asset Classification: Tangible Assets: Physical, like land, buildings, machinery. Intangible Assets: Non-physical, such as patents, copyrights.

Depreciation Claim Conditions: Ownership, business usage, active utilization are prerequisites. Co-owners can claim depreciation based on their ownership share. Depreciation Calculation Differences: Companies Act allows various methods; Income Tax Act mainly uses Written-down Value. Specific depreciation rates specified in the Income Tax Act.

Additional Insights: Interest on borrowed funds for asset acquisition can be added to the asset's cost. Additional Depreciation rates for manufacturing assets differ based on usage duration.