Depreciation in Income Tax And Corporate Tax Planning : Practice MCQ Questions & Answers with Explanations

The correct answer is Component basis. Under this method, the cost of a large asset (e.g., machinery) is allocated to its different components and each component is depreciated separately, since components may have different useful lives. Charging depreciation at a single rate on the whole asset would distort its value. This method is prescribed by both Accounting Standards and the Companies Act, 2013.