Depreciation on Leased Assets as Per Income Tax Law

In India WDV depreciation on the block of assets is allowed for the purpose of tax. When an asset is sold from the block of assets, the firm obtains salvage value but loses depreciation tax shield on the amount salvage value forever.


My question is " While undertaking lease evaluation, what is the treatment of depreciation tax shield and salvage value under Indian Tax Laws"?

Thank you.

Regards,

Riyaj Shah from India ( 8/16/2011 12:25:39)

 Riyaj Shah! As per section 32 of Income tax law, depreciation is acceptable loss of business but there are 13 rules for providing it as the loss of business and one of this rule is that only owner of assets has right to get the deduction of depreciation. As per AS 19, only Fixed assets under financial lease will be allow depreciation not any operating lease. In operating lease, you can only deduct given rent from your total income for income tax purpose. Only real owner of assets under operating lease will be allowed to get the benefit of depreciation tax shield.