CONDITIONS FOR CLAIMING DEPRECIATION [SECTION 32(1)]

1. The assets must be owned, wholly or partly, by the assessee.

2. Co-owners are entitled to claim depreciation to the extent of the value of the asset owned by each co-owner.

3. The asset should be actually used for the purpose of business or profession of the assessee.

4. Depreciation is not allowable on the cost of land.

5. Depreciation is mandatory from AY 2002-03 and shall be allowed or deemed to have been allowed irrespective of claim made in the profit & loss account or not.

6. Where the asset is not exclusively used for the purpose of business or profession, the depreciation shall be allowed proportionately with regards to such usage of assets (sec. 38).

 

Section 32(1) provides that depreciation is to be computed at the prescribed percentage on the written down value of the asset which in turn is calculated with reference to actual cost of the assets. In the context of computing depreciation, it is important to understand the meaning of the term ‘WDV’ & ‘Actual Cost’