How to Calculate Depreciation on Additions

Zen IT || How to Calculate Depreciation on Additions

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How to Calculate Depreciation on Additions:       

Depreciation on Additions Depends on Asset Purchases During the Year

Depreciation on additions depends on whether assets are purchased for 180 days or more in a year or less than 180 days.

  • If the asset is put to use for less than 180 days, depreciation is allowed at 50% of the amount calculated using the normal depreciation rates.
  • If the asset is put to use on or before October 5th of the year, then 100% depreciation is allowed; otherwise, only 50% is allowed.
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Let’s understand the concept of depreciation on additions using the following example in the software:
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Step 1:
Go to Transaction >> Business & Profession Income >> Depreciation Chart:


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Step 2:
Click on "Addition" and then press the "F4" key to enter the addition:


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Step 3:
Scenario: Block of Assets on Buildings
  • Depreciation Rate: 10% per year
  • Opening WDV (Written Down Value): ₹100,000
  • Depreciation for Previous Period: ₹10,000
Addition 1: Asset Put to Use on or Before 5th October ("180 Days or More")
  • Cost of Asset Added: ₹100,000
  • Depreciation Rate: 10% (since the asset is used for more than 180 days)
  • Depreciation for this Addition: ₹100,000 × 10% = ₹10,000
Addition 2: Asset Put to Use on or After 5th October ("Less Than 180 Days")
  • Cost of Asset Added: ₹100,000
  • Depreciation Rate: 5% (since the asset is used for less than 180 days)
  • Depreciation for this Addition: ₹100,000 × 5% = ₹5,000
Total Depreciation for the Year:
  • Opening Depreciation: ₹10,000
  • Depreciation for Addition 1 (180 days or more): ₹10,000
  • Depreciation for Addition 2 (less than 180 days): ₹5,000

Total Depreciation = ₹10,000 + ₹10,000 + ₹5,000 = ₹25,000

This explanation lays out the process for calculating depreciation based on the date the asset was put to use, and the total depreciation for the year adds up to ₹25,000.

Hope this helps.