Urgent - Depreciation on buiding

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Yasmin Salim Shaikh

Yasmin Salim Shaikh (Querist)
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01 July 2009 I just wanted to know why do we charge depreciation on bldg when we the cost of bldgs ever rising?

CA.Tarun Maheshwari

CA.Tarun Maheshwari (Expert)
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01 July 2009 Dear, It is assumed that cost of building is not increasing. It is the cost of land which gets incresed, so we do not charge depreciation on land.

Nayan Das

Nayan Das (Expert)
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12 May 2011 its depend on capital work in progress to transfer fixed assets i.e. Building

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Nayan Das

Nayan Das (Expert)
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12 May 2011 its depend on capital work in progress to transfer fixed assets i.e. Building

Sunil

Sunil (Expert)
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30 June 2016 Depreciation is not taken on land if you buy land and construct building on it. You take depreciation only on the building component. If your agreement is a composite agreement where you are paying for a unit in a building from builder or on resale from owner of the unit or member of an apartment / premises cooperative society then you cannot charge depreciation if the land value is not delinked from the sale agreement. If you buy from builder with land and construction value separate you charge depreciation on construction value only.

When Maharashtra Government adjudigates rates for different areas they use ready reckoner rates listed for land, residential, commercial and industrial property. Till December 31, 2015 they used to give depreciation in value depending on age of property on these published rates. However, now from 1.1.2016 they first take value of the property (residential, commercial or industrial) and minus the land value. Then they calculate the depreciation as per the age of property and minus it off. To the end result they add back the land value. This will be the value the stamp officer will use for adjudication and charge you duty on the higher of the value of your agreement or the value he arrived at using recknoner rates and providing depreciation as above.

Therefore if you buy a property on resale as a composite value and you still want to use the depreciation, you can consult an expert and delink the land value and depreciated value of the construction. However I would suggest that if your composite value is lower than the starting rate of stamp officer recknoner value, you recalculate the depreciation after minusing the land value as per recknoner. If your consideration is higher, please allocate the excess to the land cost and keep the value of construction as per what stamp duty officer uses. The entire calculation of stamp duty is given to you and the higher of the values charged.