Income tax depreciation in india

[Former Member]

Dear All,

How do we adress the income tax depreciation in India.

As we know the depreciation treatment for Income tax depreciation is a block concept...how do we adress that...

Could any one explain elaborately if possible...short and precise inputs are also welcome...

Please help to resolve the issue

Sapfrido

[former_member195124 · Accepted solution]

Hi Sapfrido

In India, depreciation on assets for the purpose of computation of net income as per the Income Tax (IT) Act 1961 is calculated over a block of assets instead of individual assets as allowed under the Companies Act 1956.

Asset acquisitions and retirements are managed over the block level. The IT Act prescribes certain rates of depreciation to be used under the Written down Value (WDV) method over these asset blocks to compute depreciation.

The following are the customization settings that may be followed in SAP in order to manage your assets in the income tax depreciation area.

1. Copy the standard chart of depreciation 0IN/1IN as provided by SAP and create your own chart of depreciation.

2. Use the depreciation area 15 for the purpose of management of assets under the IT Act. Make it statistical in nature. (Reference Transaction Code: OADB). Do not check the box negative net book value.

3. Specify that the Income Tax depreciation area takes over the APC from the book but not make it identical (Reference Transaction Code: OABC).

4. Create an asset class for the purpose of income tax blocks. This asset class will be used to create only group assets. (Reference Transaction Code: OAOA)

5. Specify that the depreciation area for income tax can be managed only for group assets. (Reference Transaction Code: OAYM). This would mean that depreciation for this depreciation area would be computed only at group asset level.

6. Specify that the asset class defined in (b) above will be used for creating group assets only. (Reference Transaction Code: OAAX)

7. Two period control methods (IT and NL) have been defined in the system for determination of start or the end of depreciation calculation at the time of a fixed asset acquisition or retirement. You may use these period control methods while creating the depreciation keys for the purpose of IT depreciation. Calendar assignments have been made for the above mentioned period control methods in order to reflect valuation requirements as per the Income Tax Act (Transaction Code: OAVH). You may create your own period control methods depending on the fiscal year variant you use. The period control methods supplied are based on the fiscal year variant V3.

8. Depreciation Keys: The following depreciation keys have been created in the system. They correspond to the income tax blocks that are prescribed under Indian tax laws. They are as below: Depreciation Keys: 1. IN1 - Tax Depreciation - 5%

This is just an outline to guide you towards Indian Taxation Depreciation Config. You can change the details as per your requirements while configuring your system.

Hope it helps

Regards

Z

[simin_george · Accepted solution]

It was very much helpful, Thanks lot..

[Former Member · Accepted solution]

HI,

You have given us an excellant solution... This solution is workout for the new implementation...

what is the solution if a company wants to add new depreciation area 15 for IT depreciation calculation, after few years???

i'm unable to upload the take over value for the group asset?

please give me the answer for the above

Thank you

[Former Member · Accepted solution]

I have seen that you have very good command in indian assets customization thats why i refered you.

zubin i am have recently joined sap . so i don't have much of knowledge about this.

now i am doing customization for india rollout for a german company.

and i stuck into tax depreciation area configuration

my fiscal year variant for india is jan -dec

and i am not following the group concept for indian income tax in my books

because client want actual posting

can you please tell me how i can configure my period control so that i can get depreciation acc. to indian IT act .I want that my depreciation should take depreciation start date as below mentioned

1 april for assets purchased between april - sep

1 oct for assets purchased between oct-march

zubin if you have any suitable solution for this please let me know

[Former Member · Accepted solution]

Dear Zubin,

Could you please provide me the step by step inputs in detail.  I have customized the same but i got struck up.

i will assign the points.

Regards,

Janardhan

[Former Member · Accepted solution]

Hi Zubin,

  Need some advise..

  Here is my scenario:

1), We are implementing local ledgers (LL) at our company in India.

2), We set 2 LL's one for Local GAAP  (LG)  & one for Tax purposes (LT). And they will be assigned to the individual Depr Areas. 

Say  Local GAAP Book   33 -> LG

        Local Tax Book        35 -> LT

This is not a new implementing.. we are already live .. But we are implementing Local Ledgers now.

Plan to use the Tax Books 35 for the purpose of Tax Ledger.

Can you give some suggestions on how to implement the  Local Tax Book based on the block of assets concept.

Also pls give details about the following stmnts:

1), Asset acquisitions and retirements are managed over the block level - Pls explain.

Don't we maintain them at Individual Asset level?

2), Specify that the asset class defined in above will be used for creating group assets only.  -

  We don't have to set up new Asset Classes rt. But enable this functionality for the new Depr Area (35) defined above.

rdgs

prasad

[Former Member]

cleared

[Former Member]

hi,

Can you give me that configreation tips those you done.

seema

[Former Member]

Dear All,

This means i have to create a asset class only for group assets- income tax purpose only....

If that is the case what would be my "companies act depreciation area" for this asset class be...should i supress

this depreciation area for Group asset class...

Thanks and regards

Sapfan

[former_member195124]

Hi

You can keep it as Depreciation Area 01

Won't be a problem.

[Former Member]

Hi Zubin,

    In our system I don't see COD 0IN or 1IN .. Are these part of any addon's.

Like India Country version (CIN).

Also we have Assets and we need to add this Depr Area for this purpose.

01 we use it for US GAAP purpose.

rdgs

Prasa