DEPRECIATION ON ASSETS USED BY SALARY EARNERS

[C.A. DEV KUMAR KOTHARI]

Salary income:

Desirability  to reintroduce standard deduction and to allow depreciation allowance to salary or wage  earners.

Salary and wages earners- expenses and depreciation:

People who earn his livelihood by employment also incur certain expenses in performance of his duties and many also use certain fixed assets for the purpose of carrying out functions and attending employment needs. It is desirable that certain deduction should be allowed for such expenses and also deprecation on assets used directly or indirectly in relation to employment.

Depreciation is allowed to employer:

If an employer provide certain assets to employee, he is allowed deprecation allowance on such assets against business income or income from other sources. We find employers claiming depreciation allowance on vehicles, AC, TV, Refrigerator, water cleaners /coolers/ acquaguard, house hold furniture, electrical and house hold appliances provided to employees. Therefore, if the assets are owned and used by employee in performance of his duties, there is no justification to deny such deduction to him against his salary income.

Standard deduction:

Earlier a deduction under section 16 of the I.T.Act,  which was popularly called as standard deduction was allowed against salary income. However, same was phased out. Now there is no such deduction allowed against salary income. The deduction was to cover certain expenses incurred in performance of duties while earning salary, though it was not necessary to prove actual expenditure. There was upper limit of deduction and therefore, therefore there was a presumption about maximum expenses which one would have incurred as a wage earner. Though there is no justification for such limit because depending on post held, salary earned, status etc. expense vary from person to person.

It is desirable that standard deduction should be reintroduced and the same can be allowed as certain percentage of gross salary earned. Different slabs can be provided fro such deduction.

Examples of assets useful in better performance of duties:

Vehicles:

Most of persons use vehicles for attending duties. Depending on income and status various types of vehicles are used. For example, many junior officers or employees use scooters, motor cycles or bi-cycles for attending duties as well as for saving time. Many senior officers uses cars for the same purpose.

Information, entertainment and health devices:

TV, Radio, etc. are used to get information as well as entertainment. Information is required even in relation to employment. For good health entertainment  is also  required for personal needs as well as for occupational requirements. Health devices / fitment equipments/ air conditioners, refrigerator, etc. help in maintaining good health which is also very much necessary for better performance in employment. Therefore, such devices help in better performance of any person.

Time saving devices:

Washing machines, vacuum cleaners, dish washers, kitchen appliances help in saving time. By saving time one can get more time and energy to perform better in his / her employment. Therefore, these devices also help in better performance of duties of any one whether he work as an employee or as a professional.

Buildings:

Building or flats owned and used for self residence or residence cum office of any salary earner is also helpful in providing physical comfort and security to such persons and his family. Buildings provided by an employer to his employees is eligible for deprecation allowance to employer. In case of rented premises, the employer get deduction for rent paid. The function and utility of such building is same whether it is provided by employer to employee or it is owned and used by employee himself.  Therefore, there is no justification for not allowing deprecation to salary earner who own and use building in connection with his employment.

Rate of depreciation on assets used by salary earners:

As the assets will be used by the salary earner as well his family members, low rate of depreciation can be fixed. The rates can be say 50% of normal rates prescribed in the I.T.Rules.

Depreciation allowance shall boost demand of such assets:

Our economy is facing slow down and therefore this is high time to extend deprecation benefit on such assets. In case depreciation benefit is extended to salary earners, it will be very helpful in capital formation in hands of salary earners and it will also boost demand of such assets. It is desirable that announcement and amendment in this regard should be made urgently.