Calculation of Depreciation (Block of assets/ WDV method)

Deprecation as per Written Down Value Method can be calculated as per the following formula:

Particulars	Amount (in Rs.)
Opening Written Down Value (WDV) of block	xxx
Add: Actual cost of asset acquired during the Previous Year Put to use for 180 days or more (upto 3^rd Oct) Put to use for less than 180 days (on or after 4^th Oct) Acquired but not put to use	xxx xxx xxx
Less: Money Payable (selling price of asset)	xxx
Less: Written down value of assets transferred in slump sale (compute Written down value of asset assuming this is the only asset in block)	xxx
**Written Down Value of Block for the purpose of Depreciation	xxx
Less: Depreciation Actually Allowed	xxx
Closing Written Down Value of Block	xxx

** Written down Value of Block of asset: -

Asset Acquired but not put to use.	No Depreciation
Put to used for less than 180 days	Half rate of Depreciation
Balance Assets	Full rate of Depreciation

NOTES:

	If asset is acquired during the current Previous Year and not put to use the depreciation shall not be allowed for such assets but that asset should be added to Block of assets.
	Actual Sale Price of asset shall be reduced and not the Fair Market Value of asset sold.
	If assessee transferred the building, then actual sales price shall be reduced and not the stamp duty value. However, if Section 50 gets attracted then Stamp Duty Value shall be considered for computation of capital gains.
	Money payable means sales price or insurance compensation in respect of asset sold, discarded, demolished, or destroyed during the Previous Year and the amount of Scrap Value.

Proviso to Section 32(1):

Depreciation is restricted to 50% if asset is put to use for less than 180 days in the year of acquisition, restriction applies only in the year of acquisition.

Year of Acquisition	Year of Put to use for less than 180 days	Depreciation Allowed	Rate
P.Y 24-25	P.Y 24-25	P.Y 24-25	Half Rate
P.Y 24-25	P.Y 25-26	P.Y 25-26	Full Rate

Depreciation in case of Amalgamation/ Demerger/ Succession

In these cases, depreciation is calculated normally and after that it shall be distributed between Amalgamating Company/ Demerged Company/ Predecessor and Amalgamated Company/ Resulting Company/ Successor in the Ratio of the number of days for which assets were used by them.

Succession means:

Conversion of Firm/ Proprietorship into Company as per Section 47(xiii)/ (xiv).
Conversion of company into LLP as per Section 47(xiiib).
Any other succession other than death.

SALE OF ASSET/ CAPITAL GAIN IN CASE OF DEPRECIABLE ASSETS (BLOCK OF ASSETS)

PART A: Where a block of assets ceases to exist (All assets Transfer)
Sale Price of Asset	5,20,000	7	9,30,000	7
Particular	Rs.	No.	Rs.	No.
Opening WDV of Block	6,00,000	5	6,00,000	5
Add: Actual cost of asset acquired	2,00,000	2	2,00,000	2
	8,00,000	7	8,00,000	7
Less: Sale Value of assets	(5,20,000)	7	(8,00,000)*	7
Capital loss	2,80,000	-	-	-
	Asset WDV Depreciation Capital Gain	No No No Yes	Asset WDV Depreciation Capital Gain	No No No Yes
Computation of CG Full Value of Consideration Less: Cost of Acquisition	5,20,000 (8,00,000)		9,30,000 (8,00,000)
STCL/ STCG	(2,80,000)		1,30,000

* Block of Asset can be nil but can never be negative

NOTE: In case of Depreciable assets there is always Short term Capital Gain/ Short term Capital Loss.

PART B: Where some assets of block get transferred
Sale Price of Asset	9,10,000	4	6,20,000	4
Particular	Rs.	No.	Rs.	No.
Opening WDV of Block	6,00,000	5	6,00,000	5
Add: Actual cost of asset acquired	2,00,000	2	2,00,000	2
	8,00,000	7	8,00,000	7
Less: Sale Value of assets	*(8,00,000)	4	(6,20,000)	4
Capital loss	-	3	1,80,000	3
	Asset WDV Depreciation Capital Gain	Yes No No Yes	Asset WDV Depreciation Capital Gain	Yes Yes Yes No
Computation of CG Full Value of Consideration Less: Cost of Acquisition	9,10,000 (8,00,000)		Normal Depreciation is allowed
STCG	1,10,000

* Block of Asset can be nil but can never be negative

NOTE: In case of Depreciable assets there is always Short term Capital Gain/ Short term Capital Loss.

Depreciation for Power Units/ Sale of Assets/ SLM method/ Individual asset system

If power units follow Straight Line Method, then they are subject to Individual Asset System Profit & loss is calculated on every sale.

Example:

Actual cost of Asset = Rs. 100

Rate of Depreciation = 10% SLM

In the 3^rd Year if asset is sold for - a) Rs. 72, b) 89, c) 117, then compute the Capital Gain (if any) and Depreciation for all 3 years.

Depreciation and tax treatment will be as follows: -

	A	B	C
Purchase Price of asset	100	100	100
Depreciation (1^st year)	(10)	(10)	(10)
Balance at 1^st year end	90	90	90
Depreciation (2^nd Year)	(10)	(10)	(10)
Balance at 2^nd Year end	80	80	80
Sales Value	72	89	117
Profit/ (loss)	(8)	9	37

NOTES:

A: In this case Terminal Depreciation of Rs. 8 is allowed as deduction in the Profit/ loss Debit side.

B: The balancing charge is taxable u/s 41(2) under the head of income from Business & Profession.

C: Rs. 20 (Upto Cost) balancing charge is taxable u/s 41(2) under the head of income from Business & Profession and Rs. 17 (Sales Price > Cost) Short Term Capital Gain is taxable u/s 50A.