Under the Income Tax Act, to work out the income tax liability, depreciation needs to be worked out based on written down value method for the block of assets and no depreciation can be claimed on individual assets.
All assets need to be assigned to the respective block of assets and written down value need to be worked out based on the equation prescribed under the Income Tax Act. Few examples for Block of assets widely used in the industry are:
Land and Buildings
Plant & Machinery
Motor Vehicles
Furniture & Fixtures
Depreciation on asset added to a block needs to be worked based on the period of commissioning of the individual asset. As per the current provisions, depreciation for an asset block can be claimed up to 100% of the allowable depreciation, if the asset is procured between the 1st of April and 30th day of September. Only 50% of the allowable depreciation can be claimed on a block, if the asset is procured between 1st day of October and 31st day of March.
As a part of Localization set up the User has to define the Block of assets. This needs to be done by defining the block of asset names in the quick codes. User has the option to define any logical name that need to be considered as a block of asset. The user is expected to define the block of asset names prescribed by the Income tax department.
In India Localization, navigate to India Local Fixed Assets > Setup > Asset System > Quick Codes.
User needs to query for ‘BLOCK OF ASSETS’
| Filed Name | Description |
|---|---|
| Type | User needs to query for the ‘BLOCK OF ASSETS’ and in the lines he can record the names of the block which he intends to operate. |
| Description | By default, BLOCK OF ASSETS will be displayed as description. |
| Value | Name/short name of the Block which needs to be created needs to be recorded against this field. |
| Description | The full name with description needs to be entered in this field. |
| Disable Date | The User can specify the disable date for a value if he wants. |
The User can define the Assessment years for Income Tax purposes. The assessment year for Income tax purposes starts on the fist day of April and ends on the 31st day of March of the next calendar year.
The User needs to define Depreciation period rate as per Indian Income tax Act. Depreciation Rate is based on assets installation date or date on which it is put into use within a fiscal year.
| Date Placed in Service falls between | Depreciation allowed |
|---|---|
| April 1 to Sept 30 | 100 % of prescribed rate |
| Oct 1 to Mar 31 | 50 % of prescribed rate |
The above information can be recorded in define period wise deprecation screen.
It may be noted that the information discussed under topic 7.2.1 and 7.2.2 are mandatory setups that needs to done for working out the depreciation under Income tax Act. These setups do not have any impact on the set ups that needs to be done in the base applications as a part of Fixed asset setup. User needs to complete the base application setup first and then carry out the localization setups.
India Local Fixed Assets Block of Asset (India) Define Periodwise Dep. Details.
| Field Name | Description |
|---|---|
| Financial Year Block | |
| Year start/Year end | The start and end date of the assessment year under Income Tax Act needs to be entered in this field. |
| Period Rate Block | The User can specify the appropriate Depreciation rate as applicable to a Block of Assets as per Income Tax Act based on assets installation date or date on which it is put into use within an assessment year. |
| Start Date/End date | The start and end dates for which the percentage of allowable depreciation can be entered in this field. As per income tax act, 100% of the allowable depreciation can be claimed for additions between 1st April to 30th September and only 50% of the allowable depreciation can be claimed for assets added between 1st of October and 31st of March. These dates needs to be recorded in these fields. |
| Applicable Depreciation Rate % | As per Income Tax Act 100% of rate of Depreciation is applicable to assets fall in the first half year of a Financial year. |
| 100 % Exempt Amount | This field has been considered as a future enhancement. mentioned here. At present this field is irrelevant as per the current enactment applicable as per Income Tax Act and Zero can be entered by the user. |
Before rolling on with Oracle Assets with India Localization, user needs to define the written down value of each block and the rate of depreciation that can be claimed against each block. User also needs to specify the start date of the block for which the opening balance is recorded.
Prerequisites:
Before you enter the Opening WDV Balances, you must:
Define Books
Define Asset Category
Define Quick Codes (for Block of Assets)
In India Localization, navigate to the Opening balance of Block India Location from India Local Fixed Assets > Block of Asset (India) > Define > Block of asset.
| Field Name | Type | Action | Description |
| Book | (Required) | Name of the Corporate Book wherein the Opening Balance for the Block of assets are going to be incorporated. |
Note: Note: Reporting of depreciation for income tax purpose is done based on the asset books and for each asset book multiple block of assets with different depreciation rates can be maintained. User may take enough care while setting up their asset books by keeping a view on the localization requirement.
| Block Name | (Required) | Block Name can be entered from LOV for which the Opening Balance will be entered. | |
| Depreciation rate | (Required) | The Corresponding depreciation rate for a block can be entered here. | |
| Start Date | (Required) | This date can be a Start Date of a First Half or Second half of a Financial year. | |
| Opening balance | (Required) | Opening Written down value of a Block of assets can be entered here. | |
| Closing Balance | |||
| Adjustment Block | |||
| Opening WDV Adjustment | (Optional) | If the User wants to adjust Opening Written down value of a Block after an Income tax assessment is finished for a Particular year. The adjustment amount can be entered here and Opening WDV value will be adjusted accordingly. | |
| Depreciation Adjustment | (Optional) | If the User wants to adjust Depreciation amount after running the depreciation program, the same amount can be entered here. In other words, this field support the functionality of Unplanned Depreciation: |
Note: Note: The User must keep in mind the following points while entering the Opening balances for a Block.
Carry forward their WDV Opening Balance only for Current financial year. Once the Opening Balance for a Block has been entered for the current financial year, the user cannot enter Opening Balances for the Same Block in the Previous or subsequent years.
If Oracle Fixed Assets module has been used in the past years, then the user needs to update Block details for every Assets entered into the System. After querying the Individual Assets, the User can update the Block details in the Descriptive Flex-field and also once this is completed the total number of Assets in a corporate Book for a Block will be captured by the System.