Depreciation

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

27 November 2013 Sir,I am investing Rs. 5 crores for Solar Panels and 2.5 crores for Solar Inverters as fixed assets. Warranty period for solar panels is 25 years and warranty period for solar inverters is 5 years. I need to know the calculation of depreciation on solar panels and inverters as per IT Act and Companies Act.
If we take the rate of depreciation on solar panels is 80%, the fixed asset is depreciated fully in 7 years but our investment is made for the period of 25 years.
Please confirm me whether the depreciation rate on solar panels and solar inverter is the same if both the assets are assembled for establishing a Solar roof top.

NARENDRA SONI

NARENDRA SONI (Expert)
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27 November 2013 The moot point here is whether the solar inverters is part of solar pannels ? i.e. without the aid of inverters if solar panals are not working efficiently, then, it is form part of solar panels and one has to claim depreciation @ 80% as stipulated rates as per Income tax Act,1961

Querist : Anonymous

Querist : Anonymous (Querist)

27 November 2013 Thanking you sir, but If we take the rate of depreciation on solar panels is 80%, the fixed asset is depreciated fully in 7 years but our investment is made for the period of 25 years. what should we do for the above information?

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Nitin Bhuta

Nitin Bhuta (Expert)
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27 November 2013 what is status of your organisation under IT Act? whether corporate or non corporate.

In either case you can follow the rates specified under Schedule XIV of the Companies Act 1956 by following SLM or WDV Method and by making suitable disclosure in the financial statements you can provide different rate of depreciation for books of accounts but claim depreciation in the Income Tax Returns as per rates specified under section 32 of the Income Tax Act 1961. There is no restriction under either law but auditor will qualify the report accordingly.

Normally under WDV method value of asset always remains outstanding on Balance Sheet but under SLM it can nullified based on number of years. Say you provide @ 10% under SLM then it will nullified in 10 years and so on.

when value of the asset gets nullified then you can revalue the same and bring back the asset in the books of accounts by following revaluation reserve accounting policies.

Querist : Anonymous

Querist : Anonymous (Querist)

27 November 2013 Thanks,
and I need to know the rate of depreciation on solar roof top

Nitin Bhuta

Nitin Bhuta (Expert)
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28 November 2013 You can estimate by taking advise from your supplier about its estimated life i.e. Total Cost/Number of Years viz. Rs.1 crore /25 years i.e. 4% p.a.

you can certainly provide differential rate of depreciation as compared to notified rates too.