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Can I claim part of laptop expenses that I bought before generating income?

Papinder Singh (Taxpayer) (72 Points)

17 September 2020

Hi, I am a professional software developer (freelancer) and I purchased a laptop for Rs. 50,000 1 year before I generated income, can I deduct this (after depreciation) from my gross revenue?

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17 Replies

Eswar Reddy S (CFO- at NHTF) (58275 Points)
Replied 17 September 2020

You can deduct entire laptop cost but you can only deduct depreciation from gross revenue

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Papinder Singh (Taxpayer) (72 Points)
Replied 17 September 2020

Sorry Eswar-ji, I did not understand your reply. You said I can deduct entire laptop cost, how can this be done? Did you mean "can't"?

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 17 September 2020

You can capitalised your laptop cost as Fixed assets in books of your Business. and than can Claim depreciation at prescribed rate on that.

So, Show Laptop as fixed assets in Business balance Sheet and the claim depreciation on that, This depreciation is deducted from your revenue every year till amount of laptop goes NIL in balance sheet.

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Papinder Singh (Taxpayer) (72 Points)
Replied 17 September 2020

Thank you for the answer Sagar-ji, but I am not running a business and I do not maintain books (I file under presumptive-scheme as I earn less than 50L).

Can I do the same as a professional/individual? (i.e claim depreciation until amount of laptop goes to NIL)

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 17 September 2020

If you are filing return return under Presumptive Taxation u/s 44ADA, than your income will be considered as 50% of your Gross receipt.
In this case you are not allowed to claim any expenses/depreciation ect. as 50% lumpsum Deduction for Expenses is already given by Government to you...and only remaining 50% is taxable...

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Papinder Singh (Taxpayer) (72 Points)
Replied 17 September 2020

Sagar-ji, do you mean if I file under 44ADA presumtive taxation scheme, only 50% of my gross revenue is my net income? Meaning if I generate 20L in revenue only 10L is taxable, and no need to maintain any books, receipts etc.? 🤯

Eswar Reddy S (CFO- at NHTF) (58275 Points)
Replied 17 September 2020

If you are filing ITR-3 then you may claim only depreciation and can't deduct laptop cost.

If you are filing ITR-4 then no deduction is allowed.50% income is treated as net income after all deductions except 80C to 80U

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Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 17 September 2020

Yes, u/s 44ADA if as software developer, you received Professional fee of Rs. 20 lakh..than 50% of that say.. 10 lakh is considered as your profit from Software development business and tax is payable on that 10 lakh.

Papinder Singh (Taxpayer) (72 Points)
Replied 17 September 2020

Thank you Sagar-ji, this is the best news of the day... :)

Eswar-ji, yes, I am filing ITR-4.

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 17 September 2020

You're most welcome Papinder Singh-ji.....
#Happpy to help you...😊

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Rohit Gaur (47 Points)
Replied 17 September 2020

Bt for that you are required to maintain books of account u/s 44aa but the books are not required to be audited u/s 44ad.

Papinder Singh (Taxpayer) (72 Points)
Replied 17 September 2020

Rohit-ji, that is confusing, doesn't 44ADA provide benefit of not maintaining books for everyone who opts for it? In what circumstances are we required to maintain books while filing under 44ADA Presumptive Tax Scheme for Professionals?

Rohit Gaur (47 Points)
Replied 17 September 2020

Filing return under 44ada will exempt you to get your books audited under 44ab. but still you will have to maintain books of account if crossing the limits as prescribed u/s 44aa i.e. for individual or huf if nti greater than 2.5l or turnover more than 25 lac.

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Papinder Singh (Taxpayer) (72 Points)
Replied 18 September 2020

Rohit-ji, I am not maintaining any official "books" but I have a personal record of all my transactions, what is your suggested course of action? Since I am exempt from audit of books, shall I just submit my ITR without showing any books? Sorry for the questions, this is my first time paying income tax. Thank you for your answers.