19 April 2010
Depreciation is the reduction in the cost of assets that has been used for business purpose during the certain amount of usage, passage of time, wear and tear.
Depreciation is mandatory for each organisation irrespective of its nature like firm, company, cooperative organisations. In case of companies, the Companies Act, 1956 prescribed the rates in Schedule VII of the companies act, 1956. For other organisation other than companies, there is no specific rate has been specified in any rules and regulation.
For entities other than companies, the rate specified in section 32 of the income tax act is followed generally.
There are various methods of depreciation but generally WDV (written down value) and Straight line method (SLM) of depreciation is followed. However, according to income tax act, the WDV methods is allowed in all cases except power generation companies.
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