13 February 2010
There are two method of Calculation > 1. Straight Line Method - (SLM) in which the historical cost is depreciated with refernec to the life of the asset and scrap value at the end of the life. A constant amount of depreciation is charged over the entire period of life. Ex. Asset Value - 100,000 No. of Years of Life of asset - 5 years Scrap Value - 10,000 Depreciation every Year for 10 Years will be > (100,000-10,000)/5= 18,000
2. Written Down Value (WDV)> Depreciation is charged on the reducing balance of the asset. The dep.amount varies every year. Ex. Asset - 100,000 Dep Rate 10%. Dep 1st year - 100,000 @10% = 10,000 Dep 2nd year - (100,000-10,000)@10% = 9,000 Dep 3rd Year - (100,000 -10,000-9,000)@10% = 8,100. and so on....
Practically, Under the Income Tax and Companies Act the rates of depreciation under SLM and WDV is given for all assets which are used while calculating depreciation on the assets.
14 February 2010
For rates of depreciation you will have to look into the table A appendix attached to Income tax Rules.Similiarly consult the schedules attached to Companies Act also.
CAclubindia
