Section 32of Income TaxAct, 1961 (ITA) deals with depreciation. It allows a deduction for the cost of tangible and intangible assets used for the purposes of business or profession. The deduction is allowed in the form of depreciation, which is a gradual decrease in the value of the asset over its useful life.

The eligible assets for depreciation under Section 32 of Income Taxare:

• Tangible assets, being buildings, machinery, plant or furniture;
• Intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature.

The rate of depreciation for each type of asset is specified in the Income Tax Rules, 1962. The depreciation is calculated on the written down value (WDV) of the asset, which is the original cost of the asset, less any amount that has been written off in previous years.

The deduction for depreciation is allowed under Section 32of Income Tax subject to the following conditions:

• In section 32 of Income tax act: The asset must be owned by the assesses.
• In section 32 of Income tax act: The asset must be used for the purposes of business or profession.
• In section 32 of Income tax act: The asset must have a useful life of more than one year.

The deduction for depreciation can be claimed in the year in which the asset is first brought into use, and in subsequent years, until the asset is fully depreciated.

The deduction for depreciation can help to reduce the taxable income of a business or profession, and can therefore save tax. It is important to note that the rates of depreciation and the conditions for claiming depreciation can change from time to time, so it is important to check the latest tax rules before claiming depreciation.

• In section 32 of Income tax act: The deduction for depreciation is not available for assets used for personal purposes.

• section 32 of Income tax act: The deduction for depreciation is not available for assets that are held as stock-in-trade.

• In section 32 of Income tax act: The deduction for depreciation is not available for assets that are held for the purpose of letting.

                          EXAMPLES OF Section 32 of the Income Tax Act, 1961

• In Thane, the rate of depreciation for buildings is 2.5% for the first 8 years, and 3.33% for the subsequent years. The rate of depreciation for machinery and plant is 15% for the first 5 years, and 8.33% for the subsequent years.
• In Pune, the rate of depreciation for buildings is 2% for the first 8 years, and 3% for the subsequent years. The rate of depreciation for machinery and plant is 12.5% for the first 5 years, and 6.67% for the subsequent years.
•  In Hyderabad, the rate of depreciation for buildings is 2% for the first 8 years, and 3% for the subsequent years. The rate of depreciation for machinery and plant is 15% for the first 5 years, and 8.33% for the subsequent years.
• A company in Andra Pradesh, that owns a building with a WDV of Rs. 100 lakhs can claim a depreciation of Rs. 2.5 lakhs in the first year, and Rs. 3.33 lakhs in subsequent years, until the building is fully depreciated.
• A manufacturer in Delhi, that owns machinery and plant with a WDV of Rs. 50 lakhs can claim a depreciation of Rs. 6.25 lakhs in the first year, and Rs. 3.33 lakhs in subsequent years, until the machinery and plant are fully depreciated.
• A retailer in Mumbai, that owns furniture with a WDV of Rs. 20 lakhs can claim a depreciation of Rs. 4 lakhs in the first year, and Rs. 2 lakhs in subsequent years, until the furniture is fully depreciated.

FAQ QUESTIONS OF Section 32 of the Income Tax Act, 1961

• What assets are eligible for depreciation under Section 32 of the Income Tax Act?

The assets that are eligible for depreciation under Section 32 of the Income Tax Act are:

* Tangible assets, being buildings, machinery, plant or furniture;

* Intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature.

• What are the rates of depreciation for different types of assets Section 32 of the Income Tax Act?

The rates of depreciation for different types of assets are specified in the Income Tax Rules, 1962. The rates of depreciation can vary from state to state. It is important to check with the relevant tax authorities in your state for the latest rates of depreciation.

• How is depreciation calculated Section 32 of the Income Tax Act?

Depreciation is calculated on the written down value (WDV) of the asset. The WDV is the original cost of the asset, less any amount that has been written off in previous years. The depreciation is calculated in Section 32 of the Income Tax Act using the following formula:

Depreciation = (WDV of the asset) x (Rate of depreciation)

• In Income Tax Act Can depreciation be claimed on assets that are not used for business or profession?

No, Income Tax Act depreciation can only be claimed on assets that are used for business or profession.

• In Income Tax Actcan depreciation be claimed on assets that are not fully paid for?

Yes, Income Tax Act depreciation can be claimed on assets that are not fully paid for. However, the depreciation can only be claimed on the amount that has been paid for the asset.

  CASE LAWS OF Section 32 of the Income Tax Act, 1961

• Mental Box Co. of India Ltd. v. Their Workmen (1968) 2 SCR 573: This case dealt with the question of whether depreciation is an allowable deduction under Section 32 of the Income Tax Act. The Supreme Court held that depreciation is an allowable deduction, as it is a charge against profits and income.
• CIT, Trivandrum v. M/s Anand Theatres (2000) 247 ITR 257 (SC): This case dealt with the question of whether depreciation can be claimed on buildings used for residential purposes. The Supreme Court held that depreciation can be claimed on buildings used for residential purposes, if the buildings are used for the purpose of the assesses business or profession.
• CIT, Bombay v. Gwalior Rayon Silk Manufacturing Co. Ltd. (1992) 193 ITR 581 (SC): This case dealt with the question of whether depreciation can be claimed on assets that are used for both business and personal purposes. The Supreme Court held that depreciation can be claimed on assets that are used for both business and personal purposes, but only to the extent that they are used for business purposes.

Mysore Minerals Ltd., M.G. Road, Bangalore v. Commissioner of Income Tax, Bangalore (1999) 238 ITR 122 (SC): This case dealt with the question of whether depreciation can be claimed on assets that are leased out to third parties. The Supreme Court held that depreciation can be claimed on assets that are leased out to third parties, but only to the extent that the assesses is able to demonstrate that the assets are being used for business purposes