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Income Tax Depreciation Solution Overview FI-AA Localization 02 May 2012 Confidential
Income Tax Depreciation
Solution Overview
FI-AA Localization
02 May 2012
Confidential
Agenda
1. IT Depreciation India
2. Solution Overview
3. Prerequisite and Configurations
4. Asset Master
5. Transactions
6. Depreciation
7. Migration reports
8. Additional Information
IT Depreciation India
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IT Depreciation India : IT Act 1961
In depreciation computation as per the Indian Income Tax Act 1961, the The
income Tax Act of 1961 requires depreciation to be computed on the block of
assets and not on individual assets.
The assets blocks and their corresponding rates of depreciation are
prescribed by the law.
Depreciation is calculated on the written down value (WDV) of the asset
block after posting relevant asset transactions during the given financial year.
The closing WDV of an asset block for the current year is used as the
Opening WDV of the asset block for the following year.
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IT Depreciation India : Requirements
Complex
calculations in
excels
Asset Block definition as per Income Tax Act
Put to use Date concept for Depreciation
Some assets attract Additional Depreciation
Asset Transactions independent of Asset Block
No restrictions on the volume of transactions
Adjustment entries at Block level
Reports for Depreciation Calculation
Data Migration Programs
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IT Depreciation India : Terminology
Block Key - specific group of assets in respect of
which the same percentage of
depreciation is prescribed
Opening
WDV -
Written Down value of the block of Asset
at year start
IT Dep. Area - identified Depreciation area which has the
relevant transactions for IT calculation
Transaction
Type Groups-
defines how a transaction type should be
treated for a block
Solution Overview
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Block assignment:
Define Asset Block
Assign Block (CSMD)
Maintain Opening WDV
Additional customizing
Block
Transactions:
Acquisition
Investment
Support
Transfer In
Transfer out
Retirement
Others..
Assets
Solution Overview : Concept
Reports:
Depreciation
Projection
Transaction
Details
Migration Reports:
Asset Blocks
Opening WDV
Assigning Block
Block Transactions
Update Asset
transactions to Blocks
Adjustment Transactions
Reporting
Prerequisite and
Configuration
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Prerequisite – Activate Business Function
1. Business Function FIN_LOC_CI_8 must be activated in order to make
the new solution available in the system
Availability : ECC 600 Enhancement Package 5
2. Ensure that Enterprise Extension EA-FIN (Financials Extension) is
active in your system.
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Prerequisite – Add India Specific fields
Activate India Specific fields
Group box S0400 must be added to Tab Layouts of Asset Classes
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Configuration - Assign Transaction types
Only Transaction types assigned here shall be used for IT depreciation
calculation according to the mapped Transaction Type Group
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Configuration- Maintain Area for IT Depreciation
Asset Transactions shall be read from the depreciation area
maintained here
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Configuration – Define Asset Block
Block can also be used for
Additional Depreciation
Asset Master
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Asset Master – India specific Data
If left blank, Ordinary
Depreciation Start Date is
considered
Attracts the Additional Depreciation
Percentage (Additional Block key is not used
for reporting)
Assign each asset to respective block in Asset Master Data
Transactions
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Transactions- Maintain Opening WDV of Blocks
Each Block must
have Opening
WDV maintained
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Transactions- Individual assets
Post Transactions( Acquisitions, retirements, Transfers) on individual Assets
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Transactions- Block
Asset Transactions summarized at block for each period
Shows cumulated values for
each Block
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Transactions– Block Adjustments
Adjustment to Transactions – due to current year Transactions
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Transactions– Block Adjustments
Opening WDV Adjustment – due to Prior Year Transactions
Depreciation
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Depreciation-Calculation
Depreciation of Block
=
( Opening WDV
+ Adjustment to Opening WDV and Adjustments to Transactions greater than 180 days
+ Acquisitions for Greater than 180 Days+ Transfer In Greater than180 Days
+ Retirements + Transfer out + Credit Memo + Investment support + Post Capitalization
) X Block Depreciation Percentage
+
( Adjustments to Transactions less than 180 days
+ Acquisitions for Less than 180 Days
+ Transfer In Less than 180 Days
) X Block Depreciation Percentage / 2
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Depreciation-Example
Opening WDV of Block = 1,00,000 INR
Dep. Percentage prescribed for the Block = 10%
Acquisitions on assets put to use for less than 180 days = 50,000
Out of this Assets with Acquisition of 10,000 attracts Add. Dep. of 7%
Acquisition on the assets put to use for less than 180 days = 30,000
Depreciation = ( Opening WDV + Acquisitions put to use before 27 Sept.) X 10%
+ Acquisitions put to use after 26 Sept X 10/2 %
+ Acquisition of 10,000 attracts Addt. Dep. X 7%
= ( 1,00,000 + 50,000 ) X 10%
+ 30,000 X 10/2 %
+ 10,000 X 7 %
= 17,200 INR
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Depreciation-IT Depreciation Report
Calculated Depreciation Amount
for each Block
Final calculations are performed as per IT depreciation rules
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Depreciation- Different amounts
Following list of columns are reported as part of Depreciation report:
Opening WDV
Different Adjustment amounts
Acquisitions
Retirements
Transfers
Capital Gain/Loss
Post Capitalization
Credit Memo
Investment support
Depreciation
Closing WDV
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Depreciation: Drill Down report
The Report helps user to track down to the individual assets and transactions of a
Block
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Depreciation: Projection Report
Project depreciation values for the remaining part of the Fiscal
year based on probable transaction values
Migration reports
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Migration Reports: Preparing for first time
Asset Block details can be fed into the system using spreadsheet
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Migration Reports : Preparing for first time
Assignment of existing assets to Asset Blocks
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Opening WDV for the existing Asset Block
Migration Reports : Preparing for first time
Additional Details
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Additional Details- SAP Easy Access Menu
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Additional Details- IMG Nodes
Thank You!
Soumya R
Globalization Product Management
Praveen Kumar
Praveen C
