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Most businesses use assets
like furniture, computers, cars, machines,
etc for providing services or products to their customers. Due to wear
and tear these assets depreciate. The income tax
departments or authorities in different countries have their own method
of fixing depreciation amounts for every financial year
for the various categories of assets. They may allow 25% per year or
20% per year or 40% per year on cars, motorbikes and computers
respectively. Also the depreciation expense allowed may depend on the
date of purchase during the financial year in question. For the
financial year beginning january 1 and ending December 31 they may
allow full depreciation amount only if the asset has been purchased in
the first 6 months i. e. by the 30th June and only 50% of the full
depreciation if they purchase the assets after end June.
Once the depletion on each asset has been calculated, you can sum the
data and finally deduct thie amount from your 'net income before
depreciation' to get your final net income on which you have to pay
a certain tax amount. The depreciated values now become the opening
values for the next financial year.
The training video
provides the details and demonstration of the calculations. |