What is depreciation as per Income Tax Act? Depreciation is an allowable deduction for actual use of assets in a business or profession. Under Section 32 of the Income tax Act, 1961, the writing off of the cost of assets over its useful life has been allowed as a deduction and the depreciation rates as per Income Tax have been defined for categories of assets separately. As per accounting standards, there are two widely adopted methods of computation – Straight Line Method (SLM) and Written Down Value method (WDV).
However, as per the Income Tax Act, the method of depreciation is written down value method, except in case of generation and distribution of power where SLM method is adopted. Another provision for additional depreciation has been provided u/s 32(1)(iia) for new plant and machinery acquired and installed by an assessee engaged in the business of manufacturing or production.
Income Tax Depreciation – At a Glance
Particulars
At a Glance
Relevant provision
Section 32
Basis
Block of assets
General method
WDV
Tangible assets
Rates vary by asset
Intangible assets
Applicable prescribed rate
Asset used <180 days
50% of normal depreciation
Additional depreciation
Subject to specified conditions
Depreciation Rates as per Income Tax
Asset
Rate
Residential building (excluding hotels/boarding houses)
5%
Other specified buildings
10%
Temporary structures
40%
Furniture & fittings
10%
General plant & machinery
15%
Motor cars
15%
Computers & specified equipment
40%
Intangible assets
25%
Buildings used for water treatment or supply projects in infrastructure facilities: 40%
General plant and machinery: 15%
Motor cars (excluding hire businesses): 15%, with a higher rate of 30% for cars acquired between August 23, 2019, and April 1, 2020.
Vehicles used for hire (e.g., taxis, buses) have a rate of 30%, increasing to 45% if purchased within the same date range.
Special Equipment: Items such as computers, medical equipment, air pollution control devices, and energy-saving devices have varying rates, often 40% for faster write-offs.
Books: Books owned by professionals or businesses (like lending libraries) may be depreciated at rates between 60% 100% depending on whether they are annual or not.
Section 32 – Depreciation
Depreciation is allowed on the written down value of the block of assets at the depreciation rates as per Income Tax Act on both tangible as well as intangible assets except goodwill of a business or profession. Tangible assets include factory, equipment, plant, machinery while intangible assets include patents, trademarks, copyright and franchise. Depreciation is calculated on the block of assets basis and thus individual assets lose their identity.
The end user of the asset is the deciding factor for depreciation rate. For example, if the assessee is in the business of leasing out vehicles, then the rate will be higher i.e. 30% instead of 15% on plant and machinery.
Method of depreciation
As per Companies Act, 2013
As per Income Tax Act, 1961
Straight Line Method (SLM)
Straight Line Method (SLM) in case of generation and distribution of power
Written Down Value Method (WDV)
Unit of Production Method
Written Down Value Method (WDV)
Block of Assets
Depreciation under Income Tax follows the block of assets principle where each block is a selection of assets belonging to the same asset class, has similar life and similar use case. The depreciation rates as per Income Tax Act for each such class of assets have been defined in the rules.
Conditions to be fulfilled for claiming depreciation
There are certain conditions that have to be fulfilled for claiming deduction as explained below:-
The asset must be wholly or partly owned by the assessee. Registration of the same under the Registration act is not determinative of ownership. The assessee for claiming dedecution is decided on the basis of beneficial ownership.
Depreciation is allowed when the asset is actually put to use and not if the asset was ready to use and not put to actual use.
The asset must be used for business or profession purposes, if the asset is put to use for both personal as well as business purposes, the amount be will be proportionately allowed to the extent it was used for business purposes.
It is mandatory for the assessee to claim deduction of depreciation while computing his taxable income except if he is opting for presumptive taxation, where it is assumed that the impact of depreciation has already been considered.
Revaluation of assets does not have any impact on depreciation computation as per the Income Tax Act i.e. the revaluation amount is ignored for computation.
180 Days Rule – Proviso to Section 32(1)
An important proviso to Section 32(1) is that when an asset is put to use for less than 180 days, the deduction amount on such asset will be restricted to 50% in the year of acquisition i.e. since the actual put to use date is less than half the year, therefore, full depreciation for that year cannot be allowed on the asset. This can be checked using the Income Tax Calculator.
Transfer of assets
In case of succession, amalgamation and demerger, the depreciation is allowed to both the parties in the ratio of the number of days for which the assets were used by them, however, the amount is computed assuming that no such succession, amalgamation or demerger has taken place.
Section 32(1)(iia) – Additional Depreciation
In case of any new plant or machinery other than ships and aircrafts which has been acquired and installed by an assessee engaged in the business of manufacture or production of any article or in the business of generation, transmission or distribution of power, an additional depreciation of 20% shall be allowed as deduction. However, there are certain restrictions for such deduction:-
The deduction will not be allowed for second hand goods whether Indian or imported.
If the asset is installed in the office premises or residential space, then no deduction will be allowed.
If the deduction for the asset is provided for the complete amount already under any other section like for scientific research (100%), no deduction will be available here.
Assets acquired on hire purchase
Under the hire purchase agreement, the hired asset shall eventually become the property of the hirer, or give the hirer an option to purchase the asset. Accordingly, the periodical payments made by the hirer would be broken into interest (to be allowed as deduction to the hirer) and payment on account of capital cost of the asset. Depreciation is thus, allowed to the hirer on the initial value of the asset, i.e., the amount for which the hired item would have been sold for cash at the date of agreement.
About the Author – This article is written by FCA Eshita Krishna , an experienced Chartered Accountant with advanced ICAI certifications in DISA, Anti-Money Laundering, Real Estate Laws, and Forex & Treasury Management. With strong expertise in direct and indirect tax, audit, risk advisory, financial planning, and financial management, she delivers accurate, experience-backed financial insights to readers.
Under Section 12(3) of IGST Act 2017 the place of supply of services directly related to immovable property is generally the location of the immovable property including hotel accommodation. This includes services relating to hotel accommodation. Provisions in the GST law have been laid down in two distinct categories for place of supply of services that are governed by the two distinct sections – Section 12 and 13. Section 12 of the IGST Act, 2017 governs services under GST where the location of the supplier as well as the recipient is within India. However, Section 13 of IGST Act shall be applicable for services under GST when then location of the recipient of service or the location of the supplier of service is outside India i.e. either the supplier or the recipient of service is located outside India.
Within these extensive sections, provisions regarding the services related to immovable property have been laid down in Section 12(3) and Section 13(4) that elaborate on the determination of the place of supply under various circumstances and conditions. Explanations and circulars explaining the intent of the sections are continuously introduced by the lawmakers to avoid litigations and clarifying the issues being raised regularly on the issues related to this issue.
Meaning of an Immovable Property – It is an immovable object, a property that cannot be moved without destroying or altering it. It is fixed to the earth, such as a piece of land or a house. It includes premises, property rights (for example, inheritable building right), houses, land and associated goods, and chattels if they are located on, or below, or have a fixed address.
Section 12(3) of IGST Act – At a Glance
Particular
Details
Relevant provision
Section 12(3) of IGST Act
Subject
Place of supply of services related to immovable property
General rule
Location of the immovable property
Includes
Hotel accommodation and specified related services
Applies to
B2B and B2C transactions, subject to applicable provisions
Section 12(3) of IGST Act – Place of Supply Hotel Accommodation
Case I – Immovable Property – Located In India
Services
Directly in relation to an immovable property including services of interior decoration, architects, surveyors, engineers;
By way of lodging accommodation by a hotel i.e. hotel accommodation, inn, club, guest house by whatever name called including a house boat or any other vessel;
By way of accommodation in any immovable property for organizing any marriage function, social, cultural, religious or business function, including services provided in relation to such function at such property;
Any ancillary services to (a), (b) and (c);
Place of Supply of Services under GST
Location where the immovable property or boat or vessel, is located or is intended to be located.
Case II – Immovable Property – Located outside India
If the location of the recipient and supplier is in India but the immovable property is located outside India;
Place of Supply of Services under GST
Location of the recipient.
Examples
(a) Mr. Harish from Gurgaon has approached an architect Mr. Fahim from Goa seeking his professional services in his house in Jaipur.
Place of Supply of Services under GST – Location where the house is located i.e. Jaipur.
(b) Mr. Harish from Gurgaon has approached an architect Mr. Fahim from Goa seeking his professional services in an immovable property in Hong Kong.
Place of Supply of Services under GST – Since both the supplier of service and the recipient of service is located in India and the immovable property is located outside India, it will be Gurgaon i.e. the Location of the recipient.
Section 13(4) – When the location of the supplier or the recipient is outside India
Transaction – Services supplied directly in relation to an immovable property, including services supplied in regard by experts and estate agents, supply of accommodation by way hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators.
Here, the place where the property is located or is intended to be located will be considered.
Example – Mr. Shiva from Jaipur has been engaged by Mr. Khan from Singapore for providing architecture services for his property in Sri Lanka. Here, the place will be Sri Lanka i.e. the place where the immovable property is located or is intended to be located.
However, where the services are provided in more than one location including a location in the taxable territory, then the provisions of Section 13(6) will be applicable.
Further, where the services are provided in more than State or Union Territory, then the provisions of Section 13(7) read with Rule 8 of the IGST Rules, 2017 will be applicable.
Rule 4 of the IGST Rules, 2017 has been inserted vide Notification No. 4/2018 – IT w.e.f. 01.01.2019 for determination of place of supply of services under GST, where the immovable property or boat or vessel is located in more than one state or one Union Territory, stating that the supply of such services shall be treated as made in each of the respective States or Union Territories on proportionate basis as explained under:-
(a) Services by way of lodging accommodation by a hotel, inn, club, guest house by whatever name called including a house boat or any other vessel
Where such property is a single property located in two or more contiguous States or UTs or both
In proportion to the area of the immovable property lying in each State or UT.
Cases except where such property is a single property located in two or more contiguous States or UTs or both
In proportion to the number of nights stayed in such property.
(b) Services provided by way of accommodation in any immovable property for organizing any marriage function, etc.
In proportion to the area of the immovable property lying in each State or UT.
Let us understand this extract of Rule 4 of IGST Rules, 2017, with the help of the following examples:-
(a) Deluxe Developers have a huge area of land in Uttar Pradesh and some adjoining parts of Bihar measuring about 30,000 sq. ft. in total. The area is Uttar Pradesh is around 20,000 sq. ft. and the rest of the land is in Bihar. Deluxe Developers have engaged an architect for some development work on this land for an aggregate amount of Rs. 60,000.
The place of supply of service under GST will be apportioned on the basis of the area of the land in Uttar Pradesh and Bihar i.e. in the ratio of 2:1.
Therefore,
Value of supply in Uttar Pradesh = Rs. 40,000/- Value of supply in Bihar = Rs. 20,000/-
(b) Mr. Malik has booked rooms in the 2 properties Platinum Hotel at Agra for 3 days and Jaipur for 4 days for his business trip. The hotel has raised a single invoice of the consolidated tariff of 7 days for Rs. 70,000/-.
The place of supply of service under GST will be apportioned on the basis of the number of nights stayed in each property, i.e., in the ratio of 3:4 for Agra and Jaipur.
Therefore,
Value of supply in Agra = Rs. 30,000/- Value of supply in Jaipur = Rs. 40,000/-
(c) Cases except where such property is a single property located in two or more contiguous States or UTs or both
In proportion to the number of nights stayed in such property.
House Boat Accommodation Services
For the services provided by way of lodging accommodation by a house boat or any other vessel and services ancillary to such services, the place of supply of service under GST is determined in proportion on the basis of the declaration made to the effect by the service provider.
Example – M/s Seashore Company provided accommodation services in a house boat to its customers that was in Maharashtra for 10 days and moved to Goa for 2 days. Therefore, the place of supply will be apportioned between Maharashtra and Goa in the ratio of 5:1 on the basis of the declaration given by M/s Seashore Company.
About the Author – This article is written by FCA Eshita Krishna , an experienced Chartered Accountant with advanced ICAI certifications in DISA, Anti-Money Laundering, Real Estate Laws, and Forex & Treasury Management. With strong expertise in direct and indirect tax, audit, risk advisory, financial planning, and financial management, she delivers accurate, experience-backed financial insights to readers.
Section 13 of IGST Act 2017 shall be applicable for determination for GST place of supply of service when then location of the recipient of service or the location of the supplier of service is outside India i.e. either the supplier or the recipient of service is located outside India. For any service provider, as crucial as it is to compute the taxes accurately and discharge the tax liabilities on time, it is of equal importance to ascertain whether the tax has to be paid as IGST or CGST and SGST/UTGST which is determined by the sections governing the Place of Supply of services under GST.
At a Glance – Section 13 of IGST Act
Provision
What it covers
Section 13(2) of IGST Act
General rule for place of supply
Section 13(3) of IGST Act
Services requiring physical presence
Section 13(4) of IGST Act
Immovable property-related services
Section 13(5) of IGST Act
Events and related services
Section 13(6) of IGST Act
Services covered by specific rules
Section 13(8) of IGST Act
Specified services
Section 13(9) of IGST Act
Historical/omitted provision
Section 12 v/s Section 13 – Place of supply of services under GST
Place of supply provisions in the GST law have been laid down in two distinct categories that are governed by the two distinct sections – Section 12 and 13. Section 12 of the IGST Act, 2017 governs the place of supply of services under GST where the location of the supplier as well as the recipient in within India.
However, Section 13 shall be applicable for determination for GST place of supply of service when then location of the recipient of service or the location of the supplier of service is outside India i.e. either the supplier or the recipient of service is located outside India. The provisions of Section 13 determine the import and export of services in various types of supply of services.
For GST place of supply of service – Section 13
The detailed analysis of the section with examples is as under:-
General Provisions – Section 13(2) of IGST Act
Transaction – For any case, where the service is not covered from Section 13(3) to 13(13)
(a) If the location of the recipient of service is available in the ordinary course of business
For GST place of supply of service – Location of the recipient of service
(b) If the location of the recipient of service is not available in the ordinary course of business
For GST place of supply of service – Location of the supplier of service.
Performance Based Services – Section 13(3) of IGST Act
Transaction 1 – Services supplied in respect of goods, which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services.
For GST place of supply of service – Location where the services are actually performed.
Example – M/s XYZ Ltd. from New Delhi has been engaged to provide testing services to the spare parts of cars. XYZ will have to perform the testing work in the car factory located in Ludhiana. Here, for GST place of supply of service will be Ludhiana i.e. the location where the services are actually performed.
Transaction 2 – Services supplied in respect of goods, where the services are provided from a remote location by way of electronic means.
For GST place of supply of service – Location where the goods are situated at the time of supply of services.
Example – M/s XYZ Ltd. from New Delhi has repaired laptops for M/s ABC Ltd. of Mumbai remotely by using Team Viewer. Here, the place of supply of services will be Mumbai, i.e., where the goods are situated at the time of supply of services.
Transaction 3 – Services supplied in respect of goods which are temporarily imported into India for repairs or treatment or process and are exported after such repairs or treatment or process without being put to any use in India, other than that which is required for such repairs or treatment or process.
For GST place of supply of service – Provisions of Section 13(3) will not be applicable and the place of supply will be determined as per Section 13(2).
Example – M/s ABC Ltd. has been engaged for providing services of cutting and polishing on unpolished diamonds which will be temporarily imported into India from Hong Kong and then exported back to Hong Kong once the process is done without the diamonds being put to any use in India. Here, for GST place of supply of service will be Hong Kong as per the provisions of Section 13(2).
Transaction 4 – Services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services.
For GST place of supply of service – Location where the services are actually performed.
However, where the services are provided in more than one location including a location in the taxable territory, then the provisions of Section 13(6) will be applicable.
Further, where the services are provided in more than State or Union Territory, then the provisions of Section 13(7) read with Rule 7 of the IGST Rules, 2017will be applicable.
Services related to immovable property – Section 13(4) of IGST Act
Transaction – Services supplied directly in relation to an immovable property, including services supplied in regard by experts and estate agents, supply of accommodation by way hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators.
For GST place of supply of service – Place where the immovable property is located or is intended to be located.
Example – Mr. Shiva from Jaipur has been engaged by Mr. Khan from Singapore for providing architecture services for his property in Sri Lanka. Here, for GST place of supply of service will be Sri Lanka i.e. the place where the immovable property is located or is intended to be located.
However, where the services are provided in more than one location including a location in the taxable territory, then the provisions of Section 13(6) will be applicable. Further, where the services are provided in more than State or Union Territory, then the provisions of Section 13(7) read with Rule 8 of the IGST Rules, 2017 will be applicable.
Services relating to events – Section 13(5) of IGST Act
Transaction – Services supplied by way of admission to, or organization of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organization.
For GST place of supply of service – Place where the event is actually held.
Example – A talent hunt show in USA is conducting auditions in India for which it has engaged a talent agency from Mumbai for auditions in Mumbai and New Delhi. Here, the place of supply of service under GST will be Mumbai and New Delhi i.e. the place where the event is actually held.
However, where the services are provided in more than one location including a location in the taxable territory, then the provisions of Section 13(6) will be applicable.
Further, where the services are provided in more than State or Union Territory, then the provisions of Section 13(7) read with Rule 9 of the IGST Rules, 2017 will be applicable.
Services provided at more than one location – Section 13(6)
Transaction – Where any performance based services u/s 13(3), services related to immovable property u/s 13(4), or services relating to events u/s Section 13(5), is supplied at more than one location, including a location in the taxable territory.
For GST place of supply of service – Location in the taxable territory.
Example – Mr. Shiva from Jaipur has been engaged by Mr. Khan from Singapore for providing architecture services for his property in Sri Lanka and in Varanasi for which he has charged a consolidated amount as his fees. Here, the place of supply of service under GST will be Varanasi i.e. the location in the taxable territory.
Services provided in more than one State or Union Territory – Section 13(7)
This section is applicable when any performance based services u/s 13(3), services related to immovable property u/s 13(4), or services relating to events u/s Section 13(5), is supplied at more than one State or Union territory.
(a) Value of such services separately collected or determined in terms of the contract or agreement entered into in this regard
For GST place of supply of service – Location as per the proportion of services as per the contract.
(b) In absence of such contract or agreement for Performance Based Services u/s 13(3), Services related to immovable property u/s 13(4) or Services relating to events u/s Section 13(5)
For GST place of supply of service – As per Rule 7 of IGST Rules, 2017, Rule 8 of IGST Rules, 2017 or Rule 9 of IGST Rules, 2017 respectively.
Specified Services – Section 13(8)
This section covers the services supplied by banks, NBFCs and intermediaries.
Here, for GST place of supply of service is the location of the supplier of services. The services included in this section are as under:-
Services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders.
Explanation:-
“Account” means an account bearing interest to the depositor and includes a non-resident external account and a non-resident ordinary account.
“Banking company” shall have the same meaning as assigned to it under Section 45A(a) of the Reserve Bank of India Act, 1934.
“Financial Institution” shall have the same meaning as assigned to it in Section 45-I(c) of the Reserve Bank of India Act, 1934.
“Non-banking financial company” means a financial institution which is a company, a non-banking financial institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner, or such other non-banking institution or class of such institutions, as the Reserve Bank of India may, with the previous approval of the Central Government and by notification in the Official Gazette, specify.
Intermediary services – Intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.
Services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, upto a period of one month.
Section 13(9) of IGST Act –Services of transportation of goods, other than by way of mail or courier
Transaction – Services of transportation of goods, other than by way of mail or courier.
Place of supply of service under GST – Place of destination of such goods.
Section 13(9) of the IGST Act, 2017 has been omitted vide Section 162 of the Finance Act, 2023 which will come into effect from 01.10.2023. After this amendment, for GST place of supply of service of transportation of goods will be as per the provisions in the default section i.e. Section 13(2) of the IGST Act, 2017.
For GST place of supply of service is the place where the passenger embarks on the conveyance for a continuous journey.
Example – Mr. A is travelling by Sunday Superfast Express from Kota to New Delhi covering 2 states. Here, the place of supply of services under GST is Kota i.e. the place where the passenger embarks on the conveyance for a continuous journey.
Services provided on board – Section 13(11)
Transaction – Services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board.
For GST place of supply of service – First scheduled point of departure of that conveyance for the journey.
Example – M/s Neon Enterprises is providing services on Sunday Superfast Express from Kota to New Delhi covering 2 states. Here, the place of supply of services under GST is Kota i.e. the first scheduled point of departure of that conveyance for the journey.
OIDAR Services – Section 13(12)
Transaction – Supply of online information and database access or retrieval services (OIDAR services).
For GST place of supply of service – Location of the recipient of services.
In order to prevent double taxation or non-taxation of the supply of a service, or for the uniform application of rules, the Government shall have the power to notify any description of services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service.
FAQs
Q1. What is the significance of the Section 13(3)(a) of IGST Act, 2017?
A1. Section 13(3)(a) of the IGST Act, 2017 applies to services supplied in relation to goods that are required to be physically made available by the recipient of the service or by a person acting on the recipient’s behalf. Where the supplier performs the service on such goods, the place of supply is generally the location where the services are actually performed. However, where the services are provided remotely through electronic means, the place of supply is determined based on the location of the goods at the time of provision of the service.
This provision does not apply where goods are temporarily imported into India solely for the purpose of repair and are subsequently exported after completion of the repair. Further, where the service is provided at more than one location, including a location in the taxable territory, the place of supply shall be determined in accordance with Section 13(6) of the IGST Act, 2017.
Q2. Which section has been omitted?
A2. Section 13(9) of the IGST Act, 2017 has been omitted vide Section 162 of the Finance Act, 2023 which will come into effect from 01.10.2023. After this amendment, for GST place of supply of service of transportation of goods will be as per the provisions in the default section i.e. Section 13(2) of the IGST Act, 2017.
