Depreciation, a Tax Planning Tool

If I use my personal car in my agency commission business, can I charge depreciation on it? Rajender Prasad, Gurgaon

Charging depreciation on personal assets put to use in a business can be used as a tax-planning tool. Let's see how this can be done.

1 Depreciation law permits you to charge depreciation on all personal assets, including your car, put to use in business. Common examples can be air-conditioners, mobile phones, furniture fixtures, personal computers or even a building for housing your office.

2. Normally, depreciation on capital asset is chargeable at rates prescribed under the Income Tax Act on the cost of acquisition for the first year and on written down value in subsequent years.

3. The Law is silent on the value to be considered for applying depreciation of such personal assets except building. Lawmakers missed out personal assets while laying down ground rules for charging depreciation of building owned by the assessee and put to use in the business carried on by him.

4. Explanation 5 to Section 43(1) of the I-T Act states: A notional depreciation is deemed to have been allowed over the years when the building was not used for business purposes. This deemed depreciation is reduced from the cost of acquisition to arrive at the value on which depreciation is to be charged from the year in which the building is used for business purposes. As a result, you are entitled to depreciation on reduced value.

5. As stated earlier, this provision covers only buildings. All other assets of personal nature can be charged on full original cost even if they are old.