Depreciation for AY 2020-2021 under Income Tax Act, 1961

• August 27, 2020
• CA Chandan Agarwal's Office

Depreciation is a way of measuring decline in the value of asset. The main causes of depreciation are the usage , wear and tear and obsolescence of the asset. Since assets are used in the business/profession therefore some amount of such asset can be logically debited to the Profit and Loss Account as a non cash expenditure and is an allowable expense. There are several methods of calculating depreciation but in this article we will understand how depreciation is recorded  in the books of accounts as allowed under the Income tax Act.

Depreciation is calculated on the asset which is used for the purpose of business and/or profession.

For claiming depreciation assessee should be the owner of asset. If such asset is partially owned then proportionate amount of depreciation is allowed to the assessee on the basis of his share in the asset. Depreciation is allowed if the assessee is beneficial owner which can be seen in the case of Hire purchase, lease etc.

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