Depreciation under the Income-tax Act is not the depreciation in the accounts. It is computed on blocks of assets, on written-down value, with rules about when an asset was put to use and what happens when a block is sold off. Most practices keep it in a separate workbook that nobody can trace back to the books. Audcrix computes it from the asset register, and keeps the register tied to the ledgers.
A register, from the client's file or from the books
The register can be uploaded from the client's own fixed-asset file, or built from the fixed-asset ledgers in Tally: the opening written-down value per ledger, each capitalisation with its date, and each sale. Nothing is written until the CA has seen what the books would bring in.
- A sale is read from the money leg — the bank or cash side of the voucher — net of any GST charged on the sale, which is not part of the consideration. Where the consideration cannot be read, the row says so for the CA to set.
- The year-end depreciation journal is not mistaken for a sale. A credit to an asset ledger from a depreciation ledger, with no money moving, is depreciation.
- Assets that look like house property are flagged before they enter a block.
Section 32, by block of assets
- Assets pooled into blocks by rate, as the Act requires, not by the class the accounts use.
- Written-down value on the block — opening, plus additions, less the consideration for assets sold.
- Half the rate on additions put to use for less than 180 days in the year.
- Additional depreciation where its conditions are met.
- A block that closes or turns negative produces a short-term capital gain under section 50, instead of a negative written-down value.
The return decides the opening
The opening written-down value of a block is an input. Where the return actually filed carries a different figure from the books, that figure is entered per block, because the income-tax computation must follow the return, not the books.
Foreign exchange on imported assets
Where an imported asset was paid for in foreign currency, the exchange difference realised on actual payment adjusts the asset's cost for tax under section 43A, and so the depreciation that follows.
Traceable both ways
Each block opens onto the assets in it, and each asset onto the ledger and vouchers behind it — so the depreciation claimed can be followed back to the books, and the books forward to the claim.
Questions CAs ask
Can the asset register be built from Tally?
Yes. It can be built from the fixed-asset ledgers — opening written-down value, dated additions and sales — or uploaded from the client's own register. Nothing is written until the CA has previewed it.
How are assets grouped for section 32?
Into blocks by rate, as the Act requires, with half the rate on additions put to use for less than 180 days and additional depreciation where it applies.
What if the opening WDV in the return differs from the books?
The opening written-down value is entered per block from the return that was filed, because the tax computation follows the return rather than the books.
Related modules
- Income Tax Compliance — Income-tax sections walked against the client's profile — 269SS, 269T and 269ST per ledger, a mode-wise 269ST register, the 44AB cash test and a taxable-income bridge.
- Ledger Analysis — Read every Tally ledger and voucher without opening a port, reconcile the read against Tally's own trial balance, and classify each ledger by its group chain.
- Disallowances — Every rupee add-back in one place — 43B(h) MSME invoice by invoice with Udyam verification, 40A(3) cash, 40(a)(ia) TDS defaults, 36(1)(va) and 14A with Rule 8D.