Most businesses today rely on company mobile phones for after the work communication. These mobiles are considered an asset since they usually last for more than a year.
At the time this article was written they are considered “office equipment” therefore mobile phone depreciation rate is the same as that of Plant and Machinery. Like any other long-term asset, mobiles are also depreciated according to the Income Tax Act of 1961 & the Companies Act of 2013.
Any property that generates value over time is considered a capital asset for a business. The organization benefits from having a mobile phone.
Two main reasons why it qualifies as a capital asset are:
Treatment of mobiles purchased by the company:
We are almost in 2023 and for AY 2022-2023, the rules and standards are as follows:
The depreciation rate according to the Income Tax Act of 1961 is 15% WDV (Written Down Value). Businesses other than companies charge this rate for mobile phone depreciation.
It is important to note that mobiles are viewed as “Plant & Machinery” therefore, the same depreciation rate applies. Here is how to find current depreciation rates as per the Income Tax Act of India, including mobile phone depreciation rates.
For AY 2022-2023, nearly 2023 at the time of writing this article, the following rules and standards apply:
Companies also use the same rate of depreciation as that of “Plant and Machinery” to depreciate mobiles.
The rates according to the Companies Act of 2013 are:
There is an argument about whether to charge the same rate of depreciation as computers. The Madras High Court held that in the case of Federal Bank Ltd. Vs. ACIT, mobiles are not in fact computers and, therefore, the depreciation will be allowed at the general rate of depreciation on plant and machinery.
Unreal Pvt. Ltd. provides mobile phones to its staff for office use. The company purchased two of them at a total of INR 80,000 during FY 2021-22.
Following is the calculation of depreciation under the Companies Act of 2013 for the next two years:
While depreciating as per the written-down value method the charges and calculations shall happen on the diminished value.
Compared to other assets, smartphones undergo frequent innovation and become obsolete in a shorter period of time.
Like office equipment, smartphones contribute to the success of an organization. Mobile phones should be depreciated annually in the books of accounts since their value decreases over time.
Although it takes more time to write off the entire value of a mobile phone even when the rate is 15% compared to its actual useful life, smartphones purchased for business purposes should be depreciated.
