21 July 2024
Depreciation on buildings is generally not allowed under the Income Tax Act in India, except in certain specific cases. Here are the conditions and scenarios where depreciation on buildings may be claimed:
1. **Business Use**: If the building is used for business purposes, such as for generating rental income or for operating a business, depreciation can be claimed. This is applicable under both the Income Tax Act and as per the Companies Act, where applicable.
2. **Plant or Machinery Embedded in Buildings**: Depreciation can be claimed on the cost of plant and machinery embedded in buildings. This is because plant and machinery are eligible for depreciation under the Income Tax Act, and if they are an integral part of the building structure, depreciation on the embedded assets can be claimed.
3. **Hotels, Guest Houses, and Similar Structures**: Buildings used for hotels, guest houses, boarding houses, or similar purposes are eligible for depreciation under the Income Tax Act.
4. **Leased Buildings**: If the building is owned by the company and leased out, depreciation on such buildings can be claimed.
5. **Improvements and Renovations**: Depreciation can be claimed on the cost of improvements or renovations made to the building, subject to certain conditions.
If depreciation on buildings has not been claimed in previous years and you now wish to claim it, you would need to follow these steps:
- **Accounting Records**: Ensure that your accounting records accurately reflect the original cost of the building and any subsequent improvements or additions.
- **Adjustment in Financial Statements**: Make adjustments in your financial statements to reflect the depreciation expense for the current year and any prior unclaimed depreciation.
- **Income Tax Return**: File your income tax return (ITR) for the current year and amend previous year's returns (if necessary) to claim depreciation on buildings.
- **Documentation**: Maintain proper documentation supporting the claim for depreciation, such as invoices, payment receipts, and asset registers.
It's important to consult with a qualified tax advisor or chartered accountant to ensure compliance with the Income Tax Act and to accurately calculate and claim depreciation on buildings. They can also assist in assessing whether your specific situation meets the conditions for claiming depreciation on buildings under Indian tax laws.
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