Depreciation is an allowance on capital assets acquired and put to use
and not expenditure unlike repairs to machinery, plant or furniture. It need
not be incurred by the assessee during the previous year. The depreciation
allowance has to be calculated on the assets of the assesee as per the methods
and rates prescribed under the income tax law.
Depreciation allowance is one of the deductions allowed from business or professional income chargeable
under section 28 or other income
chargeable under section 56(2)(ii) or 56(2)(iii) of the Income Tax Act, 1961.
As per section 32 of the Income Tax Act, 1961, depreciation is allowed
on tangible assets and intangible assets owned, wholly or partly, by the assessee and used for the purposes of business
or profession.