For example, in this case, if your net profit was Rs. 500,
and this is your net profit, and this is Rs. 500.
Obviously, if the net profit has come out, then I would
have minused the depreciation expense.
Remember the 11th class Profit and Loss account that we
used to make.
Out of that, I would have minused the depreciation.
Now that I have minused the depreciation, only after that
my profit is left.
What I am saying to you is, if this is a company, then the
rates are imposed on the company by the Companies Act.
So, when the accountant is sitting to enter the
depreciation, he must have imposed the rates of the
Companies Act on this.
After that, this net profit has come out.
This is it.
The income tax says that according to our rate, the
expenses that we will allow you, all the expenses that we
will give a reduction, we will give according to our rates.
So, because of this, the expense that you have already
given, the profit that you have reduced, first add it back.
So, this depreciation is as per books.
Depreciation as per books.
Okay Sir?
Add this back.
Suppose this was Rs. 100, so you added it back.
Now your profit would have increased a little.
Add Rs. 100 to Rs. 500.
Your profit has become Rs. 600.
You have removed the effect of depreciation.
The income tax says that you have removed the effect.
Now we will give depreciation according to our rates.
According to our rates, for example, depreciation as per
income tax.
That will come out.
How much is that? Rs. 140.
Minus that.
According to the Companies Act, or whatever depreciation
you have put in your Profit and Loss account, add that back.
The effect of that will be gone.
The profit will increase.
And the income tax says that there should be this much
depreciation.
According to us, that should be minused.
That is allowed.
This is the adjustment.
In which? In Accounting Profit.
Sir, on which rates does it apply?
Let's discuss this.
How do we do it? What do we do?
Sir, look.
How many assets are there on this earth?
A car is an asset.
Your office is an asset.
Think in the sense of a businessman.
You are a businessman who runs a factory and has a
corporate office.
This table, furniture, computer is an asset.
Lighting, telephone, intercom, printer.
Is there a factory building?
These are all assets.
My plant and machinery is an asset.
Vehicles are my assets.
For example, if I have an airline business,
like Indigo, then aeroplanes are also my assets.
Aeroplanes are also my assets.
Do you understand so far?
What did I say about assets?
As soon as you have an asset, you have to take depreciation
on that asset.
You will get it.
Believe it or not, you will have to take depreciation.
In that case, there can be confusion.
If there is a tool, it can also become your asset.
What should we do with it?
What should we do with each asset?
The government said, there is confusion.
As I always tell you, every problem has a solution.
Those who work hard get results.
Our government said, don't get confused.
Don't get tensed.
Do something simple.
Divide all your assets into 4 categories.
1, 2, 3, and this is 4.
In this world, 4 is a very strange number.
What will 4 people say?
What will 4 relatives say? 4 people say 4.
If you subtract A from Achar, it becomes 4.
4 is a very strange number.
All the assets in this world, divide them into 4 categories.
You can call them categories.
Income tax says, block.
Block 1, block 2, block 3, and block 4.
What will come in these categories?
One block is for plant and machinery.
Second block is for furniture.
One block is for furniture.
One block is for building.
One block is for intangible assets.
I have made categories.
Whether it is small or big, which block will you put?
Plant and machinery.
Whether it is telephone equipment or intercom phone, think
and tell me, which block will you put?
Is it intangible asset?
Is it building?
Is it furniture?
Is it plant and machinery?
Will it go in this block?
It will go in this category.
You don't have to make any other categories.
If it is building, office building, where will it go?
Where will it go?
In building.
If it is furniture, sofa, table, office table for working,
which side should I put? Office table will go in furniture.
I have a software with which I work.
My setup, for example, our recording setup runs on a
particular software which is very expensive.
That is also an asset for me.
I cannot work without that software.
If I sell it in the market, it may not sell for that much.
I will have to take depreciation.
What is that software?
Is it furniture?
Is it building?
Is it plant and machinery?
It is an intangible asset which I cannot touch.
It is an intangible asset.
I have a patent for something.
I have a copyright.
I have a license for a particular thing.
That is my intangible asset.
Sir, why did we do this?
Why did we make 4 categories?
We made 4 categories because the purpose of making 4
categories is that their rates are almost same.
For example, if you talk about intangible assets, my dear,
the rates of intangible assets are 25%.
25% of intangible assets
are depreciated.
What is the value of that?
We will discuss that later.
First, understand the rates.
Buildings have 2-3 rates.
Not more than that.
If it is an office building, what will happen?
Furniture has almost the same rate.
Plant and machinery also have 2-3 rates.
We have divided the categories.
If you are in this category, you will have 2-3 rates.
We will give you depreciation according to the rates.
Is the point clear?
Okay.
Okay, sir. No problem.
We have divided the assets in categories.
There will be different rates of those categories.
You will get the same depreciation there.
On what will you get depreciation?
On written down value.
On WDV.
Do you know what is WDV?
Have you studied it?
If you haven't studied it,
I will explain it to you.
It is a Rs.100 asset.
Don't worry.
For example, you bought an asset worth Rs.100.
At the end of the year, depreciation will be Rs.10.
Assume that the rate is 10%.
Depreciation will be Rs.10.
What will be its value?
It will be Rs.90.
If you are using WDV, i.e.
written down value, then the depreciation that you will
charge now, instead of Rs.100, you will charge Rs.90.
The written down value that you will charge now, your
depreciation will be Rs.81.
This is WDV.
Depreciation in income tax is always calculated according
to WDV.
Is the point clear?
Let's move ahead.
Just absorb this.
If you want to note it down, then note it down.
You will get it in the book as well.
Let's read it.
Is it clear so far?
WDV means it is clear.
Assets are divided into 4 categories.
We will apply depreciation on this.
We will apply depreciation on total.
What should be done for that?
Profit will be kept here.
The depreciation that we have put as accountant, that
depreciation should be removed.
This depreciation should be minused.
and put in the new expense what the income tax people say
ok come to the reading come we are on a very important
topic friends don't be upset because your big brother is
standing here big brother no tension will come in your life
related to this subject this is my promise i am not joking
so many lectures have been done friends we are talking
about tangible assets what is the first thing he said one
block is for building the order has changed a little but
one block is for building if the
is for residential purposes then how much depreciation will
you take 5% some temporary you told temporary erection
means have you ever seen a construction site where the
laborers work they make a small they make a small they make
a small house they keep their stove there they live there
it is temporary it is temporary until the building is ready
once the building is ready they leave it the birds leave
their nests they leave the nests are empty forever the
birds go to a new place they make a new
how much depreciation 40% because it is temporary it is a
residential building 5% for normal official purposes 10%
depreciation do we have to remember this there is no need
to remember this when you work in an office there will be
an income tax book everything will be written remember the
basics if it is an office building 10% there is no need to
remember everything just an idea of depreciation because it
is an important concept and it is a mandatory expense it is
not that you ignore this
the government has said depreciation you should know how to
take it furniture and fittings electric wiring the
expensive wires
Rs 50,000 per meter electrical if you have a business if
you have to install a pipeline the expensive wires, pipes,
fittings you can take depreciation on that because it is
your asset first you have to classify whether it is your
asset or not if it is not an asset it is a normal expense
the more you invest, the more deduction you get if it is an
asset, what do you get? depreciation if it is an office
building, 10% come to plant and machinery what have they
made? they have made different blocks
you have taken up to a particular date motor car other than
if your business is not about driving cars on rent then how
much depreciation you will take that is written here 30% if
it is there, it is 15% in plant and machinery observe what
they have taken in plant and machinery they have taken
motor car what are your cars? there are cars in every
business there can be a van to carry goods to travel there
are mini vans, trucks that will also be covered here
aeroplanes someone's aviation sector
40% depreciation maximum depreciation 40% depreciation
given in plant and machinery blocks rates against which it
is specified, you will have to take air pollution control
equipment sometimes the government says you have a factory
you will install such equipment to reduce pollution you
will install such equipment how much depreciation you will
take? 40% whatever you have written in books as per
company's act add it back make accounts as they are there
is no problem in accounting make accounts
they are you have to add back the depreciation which you
have put in books and you will minus it
life saving medical equipment hospital workers also work
40% oil well someone has an oil well in Surat
I have an oil well in Bombay how much depreciation you will
get? 15% renewable energy windmill which generates power
40% on computer this is important you go for an interview
because they also don't know all the internal rates
I will tell you 2-3 remember about cars because cars are in
every business whatever is in every business remember about
cars 15% 30% 45% according to different dates remember
about computer computer is in every business how much for
computer? 40% books how much for books? 40% if you have a
library business or a normal business because you use books
in business you bought a book to refer you bought a book
for income tax you will get depreciation on that book on
which value? written down value
was WDV? it was a 100 rupee set depreciation was given in
10 rupee depreciation was given in 90 rupee depreciation
was given in 100 rupee this is WDV and generally if you
have a normal machine whose rate you don't understand you
have to take a general rate of 15% remember this rate 15%
planted machinery computer 40% different rates of cars
building 10% last category know-how know-how means how this
thing is made what is the production in what quantity what
is the next process how many people
how things are made that is a know-how that is an
intangible asset can I touch that knowledge? is it tangible?
I can't touch that knowledge what is the rate on that? 25%
do you have a license? do you have a franchise? if you have
a franchise the government says that is an intangible asset
McDonald's franchise what is the depreciation on that? 25%
is it mandatory? sorry, it is mandatory