What Is The Full Form Of WDV In Income Tax?
WDV full form in income tax is Written-Down Value. It’s a way to figure out how much an asset is worth after considering how much it has lost value over time. This can also be referred to as the Reducing Balance Method. It is beneficial in that the book value of an asset gets to drop by a certain percentage each year, and this is possible. This is important in such a way that a larger value drop can happen within the first few years of the asset’s life. This is a big help to companies as there is a better tax planning scenario involved.
Calculation and Importance of WDV:
To find the WDV, you take the original cost of an asset and subtract all the depreciation that has been added up over the years. For instance, if a company buys a machine for $100,000 and the depreciation rate is 10% per year, the WDV after one year would be $90,000, after two years $81,000, and so on.
Legal and Tax Importance of WDV:
In the world of taxes, WDV is important because it changes how depreciation expenses are calculated. This essentially means that based on the WDV of an asset, as given in the Income Tax Act, depreciation would occur. Of immense importance in the application of this approach is the quick loss of value in the first years of using items such as cars and machines.