In simple terms, a block of assets is a grouping of similar assets that are used for the same business purpose, on which depreciation is calculated collectively rather than individually. This concept is crucial for ensuring a uniform method of depreciation and avoiding the cumbersome process of calculating depreciation for each asset separately.

Key Points:

• Definition & Purpose:
  The Income Tax Act, 1961 (particularly under Section 32) groups together assets that are similar in nature and use, such as all machinery, all computers, or all vehicles used in a business, into what is called a block of assets.

  • This approach simplifies the calculation of depreciation by applying the same depreciation rate to the entire group.

• How It Works:

  • Cost Accumulation: The cost of all assets in a block is combined.

  • Depreciation Calculation: Depreciation is then computed on the entire block’s cost, and the written down value is carried forward from one year to the next for the entire block.

  • Adjustments: When new assets are added or old assets are disposed of, the block’s cost is adjusted accordingly.

• Benefits:

  • Simplification: This method reduces administrative burden, especially for businesses with a large number of similar assets.

  • Uniformity: It ensures consistency in how depreciation is claimed over time.