Depreciation is an expense which is periodically allocated cost of an asset’s original purchase value/Acquisition cost over the useful life of the asset. When companies place a fixed asset in operations for use over multiple years, they cannot expense the asset in one single period, but must depreciate the value of the asset over time and charge related cost allocation to depreciation expense. Using depreciation expense helps companies better match asset uses with the benefits provided by an asset.
In India Depreciation is considered as a most Important aspect from Taxation Point of view.
Recently our Finance Ministry Of India Hon. Nirmalaji Sitaraman announced some measures for the auto sector to create demand for motor vehicles.
1) Announcement of Higher Depreciation on vehicles purchased from 23rd Aug 2019 to 31st March 2020.
2) Deferring increased registration fees of vehicles.
3) Enhancing Liquidity for purchase of vehicles.
4) Relaxation to clear the stock of BS-IV old stocks.
In this Article we are going to discuss about Higher Depreciation Rate on some vehicle and care to be taken while finalizing books of accounts in this regards for Financial Year 2019-2020.
|Block of Assets||Depreciation allowed as per percentage of written down value|
|(ii) (a) Motor buses, motor lorries and motor taxis used in a business of running them on hire other than those covered under entry (b).||30 %|
|(b) Motor buses, motor lorries and motor taxis used in a business of running them on hire, acquired on or after the 23rd day of August, 2019 but before the 1st day of April, 2020 and is put to use before the 1st day of April, 2020.||45 %|
In the view of above announcement, Income Tax Rules has been amended and depreciation benefits with higher rates will be allowed on vehicles acquired on or after the 23rd day of August, 2019 but before the 1st day of April, 2020 and is put to use before the 1st day of April, 2020.
Registration and other procedure must be ensured, documented and proofs must be kept, to satisfy the AO and to avoid dispute about date of put to use.