WHAT IS DEPRECIATION?

Depreciation is positive decline in the real value of a tangible asset because of consumption, wear and tear or obsolescence. The concept of depreciation is widely used for the purpose of writing off the cost of an asset against profit over an extended period (its depreciable life), irrespective of the real value of the asset. Depreciation is charged against income or the profit and loss account, and there are different methods of calculating it like straight line method or written down value method. The Income-tax Act (except for undertaking engaged in generation and/or distribution of power) the method of computing the depreciation is WDV method on the block of assets.