01 June 2009
Can higher depreciation be claimed on Swift Dezire purchased after 1.1.2009 by a dealer in steel used for business purposes @ 50% as per new notification by CBDT does it comes under the definition of commercial vehicle
28 July 2024
### Higher Depreciation on Swift Dzire
#### **Understanding Depreciation on Commercial Vehicles**
1. **Depreciation Rules Pre-2011**: - Prior to April 1, 2009, vehicles used in business and commercial purposes had a standard depreciation rate. - For passenger vehicles used for business purposes, the depreciation rate was generally 15% per annum.
2. **New Depreciation Rate Post-2009**: - The Central Board of Direct Taxes (CBDT) issued a notification effective from April 1, 2009, which revised the depreciation rates for various assets. - For commercial vehicles, including cars used in the business of transportation or as taxis, the depreciation rate was increased to 50%.
#### **Swift Dzire Classification**
- **Swift Dzire**: This is a passenger car and not typically classified as a commercial vehicle under normal circumstances.
#### **Key Points to Consider**
1. **Commercial Vehicle Definition**: - **Commercial Vehicle**: Generally includes vehicles used for the transportation of goods or passengers for hire or reward. - **Passenger Vehicles**: Vehicles like Swift Dzire, which are used primarily for personal use or as a private vehicle, are not classified as commercial vehicles under usual definitions.
2. **Notification by CBDT**: - The notification issued by the CBDT provided higher depreciation rates for commercial vehicles but does not include passenger vehicles like Swift Dzire unless specifically used in a business of hiring or leasing.
3. **Eligibility for Higher Depreciation**: - **To qualify for higher depreciation (50%)**, the vehicle should be used in a business involving transport or commercial activity. This means it should be used for transporting goods or passengers for hire, not just for personal use or standard business purposes.
#### **Conclusion**
Given that the Swift Dzire is primarily a passenger car and not used for commercial transport purposes:
- **Standard Depreciation**: You can generally claim depreciation on the Swift Dzire at the standard rate applicable for passenger vehicles, which was 15% per annum under the Income Tax Act for business use. - **Higher Depreciation (50%)**: To claim a higher depreciation rate of 50%, the vehicle must be classified as a commercial vehicle used for transport business, such as a taxi or goods transport vehicle. A standard Swift Dzire used for personal or non-commercial business purposes does not qualify.
### **Action Steps**
1. **Review Usage**: Confirm the primary use of the vehicle. If used as a taxi or for transporting goods/passengers for hire, it may qualify for higher depreciation.
2. **Consult a Tax Professional**: Verify with a tax consultant or CA if the specific use of the vehicle might qualify it for higher depreciation.
3. **Check Documentation**: Ensure that any claim for higher depreciation is backed by proper documentation and usage records proving the commercial nature of the vehicle.
In summary, for the Swift Dzire, unless it is used in a manner that fits the definition of commercial vehicle, you would typically claim depreciation at the standard rate applicable for passenger vehicles.
CAclubindia
