If I get laptop bought from my family member in overseas. Actually i pay for that laptop to him in INR, but he buys for me in his country`s currency. Once I get that laptop, i will be using it for my trading(F&O).
So can i claim that laptop expense while calculating tax ?
If so, Do i need to file expense based on the money i transferred to him ? or based on the bill in that country with converting its currency to INR on that bill date ?
Should i get the bill from him and keep it ?
Can i just keep soft copy of the bill ?
Is there anything should i be considering in this matter ?
Since laptop is an asset, you cannot claim it as expense fully in one year. Instead you can claim depreciation at the rate of 40% every year on the amount transferred to him in first year and on the residual value in subsequent years.(Assumed the invoice is in the name of your family member).
Eg : If 50k is transferred to your family member for taking the laptop, then 50k becomes the cost of the asset.
Depreciation for first year will be 50k×40%=20k.
Depreciation for second year will be 30k×40%=12k (because 20k is claimed as depreciation in the first year)
For third year, it will be on 18k.
Thank you so much for your detailed explanation.
Do I need to get the bill from him and keep physical bill for ever or keeping just soft copy of the bill is enough for any future tax related verification ?
Soft copy of the bill suffices. Mail communication saying x amount has been paid against the purchase of laptop also works in the case.
Hey @Trading_143,
Since you are using the laptop for your business activity i.e. trading, you can claim it as a business expense. As per the Income Tax Act, you cannot claim the cost of the asset as an expense; however, you can claim the depreciation on the asset as an expense
You can claim the expense based on the money you transferred to your family member.
When filing your ITR you are not required to submit any proofs such as bills, however, you should preserve it in your records in case there is any scrutiny from the ITD in the future.
Thank you all for the detailed explanations. It was so helpful.
Hey @Quicko
a) What is the depreciation percentage one should keep for laptop? Is there any accepted figure or can be just random?
b) For claiming various expenses mentioned in your article like electricity, insurance, office supplies, does the payment have to come necessarily from one’s own account? Or an immediate family member’s account is accepted too?
Thanks!
Hey @SachinSingh
a) The Income Tax Department has prescribed rates of depreciation and according to that depreciation percentage for laptop is 40%
b) For claiming expenses the invoice should be in the name of the trader and the invoice date should fall in the relevant financial year. Payment can be done from relatives account
You can refer to this article to know more:
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Depending on the amount in question and the IT officer, even CC statements(this has to be your CC) could be accepted. But better to keep invoices.
Hey @Quicko, if someone hasn’t claimed the depreciation deduction during the first year for a product, would it be a problem if they want to claim it for the second year?
Say, I bought a laptop for business purposes in March 2020, but didn’t claim any deduction for FY 2020-21, but want to claim it for FY 2021-22, would that be an issue? Of course, the amount claimed would be lower second time around…
Hi @sachin
Yes, you can start claiming the depreciation from the 2nd year i.e FY 2021-22. There is no such clear guideline that depreciation should be claimed from the 1st year itself. As per the Income Tax Act, depreciation can be claimed from the year the asset is put to use.
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