Rate of depreciation for software under companies act

Schedule II of Companies Act , is indicative in nature as it indicates instead of specifying the rates of depreciation for various assets and specifies that depreciation should be provided based on the useful life of assets. It also provides 3 depreciation calculation methods, e. Companies Act , is applicable for the purpose of depreciation of assets, with effect from 1st April in the case of a company.

The method of computation of depreciation has changed with the implementation of Schedule II. From a rate-based approach, the shifting is made towards the useful life of assets as a basis for determining the rate of depreciation. Plant and Machinery used in mines and quarries — Portable underground machinery and earth moving machinery used in open cast mining [NESD]. Electrical Machinery, X-ray and electrotherapeutic apparatus and accessories thereto, medical, diagnostic equipments, namely, Cat-scan, Ultrasound Machines, ECG Monitors, etc.

Heavy Lift Equipments — Cranes with capacity of more than tons Cranes with capacity of less than tons. Furniture and fittings used in hotels, restaurants and boarding houses, schools, colleges and other educational institutions, libraries; welfare centres; meeting halls, cinema houses; theatres and circuses; and furniture and fittings let out on hire for use on the occasion of marriages and similar functions. Motor buses, motor lorries, motor cars and motor taxies used in a business of running them on hire.

Motor buses, motor lorries and motor cars other than those used in a business of running them on hire. Crude tankers, product carriers and easy chemical carriers with or without conventional tank coatings. Dredgers, tugs, barges, survey launches and other similar ships used mainly for dredging purposes.

Railways sidings, locomotives, rolling stocks, tramways and railways used by concerns, excluding railway concerns [NESD]. Register Now!! Lakshy Semi-Qualified C. What is depreciation rate for Computer Software as per Companies Act with latest amendment applicable?.

Now useful lifes to be used instead of Rate. Please reply. Dineshchandan articled assistant 84 Points Replied 22 June Happy sood Student 60 Points Replied 23 June So, in case of softwares, management will estimate its useful life for computing depreciation. As per AS 26 on Intangible Assets, one may opt for useful life of years.

For Eg - In case of softwares like SAP, which have a long duration utility, management may take 10 years as its useful life.

It should disclose it in its notes along with the reason. Softwares which are purchased separately and whose use is not dependent on any specific machine should be depreciated as per AS 26, which mentions to depreciate it taking its useful life years. Your are not logged in. More Post. Then, in the 2nd year, the depreciation amount of the 1st year is reduced from the initial book value of the asset to arrive at a new reduced or written down book value on which we calculate the depreciation.

Use a standard keyboard, scientific calculator or calculator on your mobile to calculate easily using this formula. If you want to consider the total asset amount including GST for calculating depreciation as per companies act, then you should not claim ITC on that asset. As per Sec 2 19 of CGST Act, Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, , the input tax credit on the said tax component shall not be allowed.

Asset purchased is laptop. The useful life of laptop given under schedule II of Companies Act is 3 years. Now, that we know the depreciation rate we can calculate the depreciation amount during the useful life of the asset laptop. Step 4: Depreciation schedule as per Companies Act during the useful life of asset laptop. The company was charging depreciation on the Straight-line method 1. The asset purchased is a laptop. The useful life of a laptop given under schedule II of Companies Act is three years.

Now that you know the concept let us see how to record a Depreciation Journal entry in Tallyprime. Step 3. Suppose, ZYZ company purchases office equipment on Rs 1,00, Then, we must charge a WDV depreciation rate of Depreciation on computers Dr 45, To Office equipment 45, For calculation of depreciation on intangible assets, the provisions of accounting standard 26 AS 26 shall apply.

Also read about the Intangible assets depreciation on official MCA website.