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Depreciation a non-cash expenditure allowed under Income Tax Act, 1961 following block concept. Under the block concept, all the assets falling within the same class and subject to same rate of depreciation are clubbed together and considered as single asset. Any alterations to the value of the block have to be strictly in accordance with the provisions of Chapter IV D of Income Tax Act, 1961. As per section 32 of Income Tax Act, 1961, a assessee is entitled to claim depreciation on fixed assets only if the following conditions are satisfied: 1. Assessee must be owner of the asset registered owner need not be necessary. 2. The asset must be used for the purposes of business or profession. 3. The asset must be used during the previous year EXAMPLE
Depreciation on buildings
The change to the tax depreciation rates in the May 2010 Budget for long-lived buildings has a major impact on future depreciation deductions that can be claimed for tax purposes. It also has a significant effect on the financial statements of entities that are required to account for deferred tax under financial reporting standards. We discuss below: The buildings to which the Budget 2010 depreciation rate changes relate A recent issues paper on the treatment of commercial fit-out going forward A recap of the accounting implications of the change to tax depreciation deductions Proposed changes to the accounting standard on deferred tax
amount to fit-out, some of the impacts of the change to building depreciation can be mitigated, including the tax impacts, accounting impacts .