Allowability of Depreciation

• Yes, depreciation is allowed as a deduction under corporate tax laws in India.
  
• It is permitted under section 32 of the Income-tax Act, 1961.
  
• Depreciation is claimed on tangible and intangible assets used in business.
  
• It reduces taxable income by accounting for asset wear and tear.
  
• The deduction is allowed only if the asset is owned and used for business.
  

Eligible Assets for Depreciation

• Tangible assets include buildings, machinery, furniture, and vehicles.
  
• Intangible assets include patents, copyrights, and trademarks.
  
• Assets must be used for business or professional purposes.
  
• Partial depreciation is allowed if assets are used for less than 180 days.
  
• Land is not eligible for depreciation.
  

Types of Depreciation Permitted

• Normal depreciation is allowed at prescribed rates.
  
• Additional depreciation of 20 percent is allowed for new machinery in certain cases.
  
• Companies can claim depreciation under the Written Down Value (WDV) method.
  
• Straight Line Method (SLM) is allowed only for power generation companies.
  
• Block of assets concept is followed for depreciation calculation.
  

Restrictions Under Concessional Tax Regimes

• Companies opting for section 115BAA or 115BAB cannot claim additional depreciation.
  
• Only normal depreciation is allowed at prescribed rates.
  
• Many other deductions and incentives are also disallowed under these regimes.
  
• This trade-off offers a lower tax rate in exchange for fewer deductions.
  
• Proper evaluation is needed before opting for these tax regimes.
  

Compliance and Documentation

• Accurate asset registers must be maintained.
  
• The rate and method of depreciation must follow prescribed rules.
  
• Auditors verify depreciation claims during tax audits.
  
• Incorrect or inflated depreciation may attract penalties.
  
• Depreciation schedules must be disclosed in the tax return and audit report.