11 November 2011
is it possible to charge different rates of depreciation on the assets classified in same category say office equipments(network wires)
11 November 2011
as per income tax its not possible, if u have charge the less depreciation then during the assessment AO will treat is as depreciiation deemed to be charged
21 July 2024
Under the Income Tax Act and generally accepted accounting principles, such as Accounting Standard 6 (AS-6) issued by the Institute of Chartered Accountants of India (ICAI), the depreciation rates are typically applied uniformly for assets classified under the same category or class. Here's how it generally works:
### Income Tax Act:
1. **Uniform Rate for Class of Assets:** - For assets classified under the same class, such as "office equipment" or "network wires," a uniform rate of depreciation is usually applied. - The rates are prescribed under the Income Tax Rules, and these rates generally apply uniformly to all assets falling within a particular class.
2. **Categories and Rates:** - The Income Tax Act categorizes assets into different classes (e.g., buildings, plant and machinery, office equipment, etc.). - Each class typically has a specific rate of depreciation associated with it. For example, office equipment might have a prescribed rate, and network wires or cables would fall under this category.
3. **Choice of Method:** - As mentioned earlier, taxpayers have the flexibility to choose between the Straight Line Method (SLM) and the Written Down Value (WDV) Method. However, this choice is generally applicable to the entire class of assets and not on an asset-by-asset basis within the same class.
### Accounting Standard 6 (AS-6):
1. **Uniformity in Depreciation Policy:** - AS-6 provides guidelines on accounting for depreciation, and it emphasizes the need for a consistent depreciation policy. - It requires that assets within the same category should generally be depreciated using the same method and rates to ensure comparability and reliability of financial statements.
2. **Exceptional Cases:** - In exceptional cases where assets within the same class have different patterns of economic benefits or useful lives, adjustments may be made. - However, these cases are rare, and the entity must justify and disclose these differences in its financial statements.
### Conclusion:
While there can be some flexibility in applying different depreciation methods (SLM or WDV) under the Income Tax Act, generally accepted accounting principles such as AS-6 require a uniform approach for assets within the same category or class. If there are specific circumstances where different rates of depreciation are considered, these should be justified based on economic benefits, useful lives, or other relevant factors, and disclosed in the financial statements.
If you have a specific scenario or need further clarification on applying depreciation rates, feel free to provide more details, and I'll be glad to assist further!
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