Depreciation rates on software as per companies act

Depreciation is allowed as deduction under section 32 of Income Tax Act, In computation of taxable income, the depreciation rate as per income tax act will be allowed as deduction while depreciation as per book profit is added back. Depreciation as per accounting terms is reduction of the cost of fixed asset in a systematic manner in order to depict the correct value of Asset-Liability position.

This help to comply with matching principles of accounting norms. In order to understand the method of computation of depreciation, one should be aware of the following provisions Limited Seats.

Register Now!! Lakshy Semi-Qualified C. What is depreciation rate for Computer Software as per Companies Act with latest amendment applicable?. Now useful lifes to be used instead of Rate. Please reply. Dineshchandan articled assistant 84 Points Replied 22 June Happy sood Student 60 Points Replied 23 June So, in case of softwares, management will estimate its useful life for computing depreciation.

As per AS 26 on Intangible Assets, one may opt for useful life of years. For Eg - In case of softwares like SAP, which have a long duration utility, management may take 10 years as its useful life.

It should disclose it in its notes along with the reason. Softwares which are purchased separately and whose use is not dependent on any specific machine should be depreciated as per AS 26, which mentions to depreciate it taking its useful life years. Your are not logged in. The useful life of an asset is the period over which an asset is expected to be available for use by an entity, or the number of production or similar units expected to be obtained from the asset by the entity.

The useful life or residual value of any specific asset, as notified for accounting purposes by a Regulatory Authority constituted under an Act of Parliament or by the Central Government shall be applied in calculating the depreciation to be provided for such asset irrespective of the requirements of this Schedule.

Depreciation Rates — Companies Act Depreciation as per Companies Act is allowed on the basis of useful life of assets and residual value of the assets. Cost Inflation Index. The method of computation of depreciation has changed with the implementation of Schedule II.

From a rate-based approach, the shifting is made towards the useful life of assets as a basis for determining the rate of depreciation.

In taxation, depreciation refers to a reduction in the value of assets due to the wear and tear of the assets. In one line, no depreciation as per Income Tax Act will be allowed if an asset is acquired in cash.

Whereas the second proviso to section 43 1 , made disallowance of depreciation, where cash payment is exceeding Rs. The second proviso to section 43 1 provides that if the assessee incurs any expenditure for acquisition of any asset or part thereof in respect of which a payment or aggregate of payments made to a person in a day, by cash, exceeds Rs.

In other words, if an asset is acquired and the same is paid in cash of more than Rs. The depreciation rate is the percentage rate at which assets are depreciated across the estimated productive life of assets.