Important points to be considered

1. Depreciation is allowable as expense in Income Tax Act, 1961 on basis of block of assets on Written Down Value (WDV) method. Depreciation on Straight Line Method (SLM) is not allowed.
2. Block of assets means group of assets falling within a class of assets for which same rate of depreciation is prescribed.
3. Goodwill and Land is not eligible for depreciation.
4. Depreciation is allowable only to the owner of the asset.
   1. A lessee is not the owner of the property therefore depreciation is allowed only to lessor. If furniture or any part is constructed by the lessee then depreciation on that is allowed to lessee.
   2. If property purchased under hire purchase contract then depreciation is allowed to the purchaser.
   3. In case of co-ownership, depreciation is allowable in ratio of their ownership.
5. Asset must be used for the purpose of business or profession.
6. If the assesse doesn’t claim the amount of depreciation as deduction, even then the amount of WDV carried forward to next year is reduced by the depreciation amount.
7. If profit is calculated on presumptive basis under section 44AD or 44AE then such reported profit is considering after all the expenses and depreciation allowable under section 32.
8. Depreciation under Income Tax Act is different from that of Companies Act, 1956. Therefore depreciation rates prescribed under income tax is only allowable whatever the depreciation is charged in books of accounts.
9. If a new addition is made in a existing asset then it is consider as an asset if it increase the capacity of the existing asset or reduce per unit cost otherwise it should be treated as an expense.
10. If there are some spare parts/machines and they are not actually used, depreciation is allowable on them because they are used for purpose of business/profession.
11. Lower Depreciation – Depreciation can be claimed at lower rate as per income tax act. But for the next year your WDV will be considered as reduced by the percentage of depreciation prescribed.
12. Depreciation is not allowed on GST component if the person wants to claim Input Tax Credit of such GST paid.
13. Deprecation is allowed only if the asset is put to use in the year of purchase.
14. If asset is put to use for less than 180 days then amount equal to 50% of the amount calculated using normal depreciating rates is allowed as depreciation.
15. Deprecation will be allowed on the basis of block of asset method.