Some History
In India, the majority of businesses that choose to implement SAP ERP are either public limited companies (PLCs) or private limited companies (LLPs). The remaining firm categories, such as sole proprietorships, HUFs, partnership firms, or LLPs, typically do not invest in such multidimensional, profoundly integrated ERP software, possibly due to their volume and scale of operations, but in rare instances, it is quite conceivable that a partnership firm with a respectable business scale capacity would be int.

The point is that the business laws in India that these types of firms are required to abide by differ slightly from one another. We won’t discuss the other laws; instead, we’ll focus on the fixed asset purchase, sale, and depreciation laws that apply to private limited companies and partnership firms.

The differences in transaction & reporting between these 2 firm groups are seen in the table below.

The purpose of this blog
After further business process discussions, certain statutory business requirements emerged for which I was unable to find the feasibility or solution anywhere, including on SAP help, some SAP notes, a SCN community blog, press books, etc. Even raising an OSS with SAP considering it to be a statutory requirement wasn’t successful. A few months ago, I was involved in a SAP implementation project, which was my first ever implementation in an Indian partnership firm.

Synopsis of Requirements
As previously mentioned, a “Indian partnership firm” adheres to the rules and regulations set forth by the Income Tax Act of 1961 rather than the Indian Companies Act of 2013, so their depreciation calculation method is different. Instead of using the useful life methodology specified by the Indian Companies Act, they use a block-wise percentage-based depreciation that also includes real-time postings in systems, which is ideal for Private Limited companies since they only need to reapply.

The three main business requirements and situations for the fixed assets process are shown below.

Additional depreciation calculation in Business Scenario 1
Section 32 of the Income Tax Act of 1961 states that, depending on the asset class or type, the depreciation computation vary in the 180-day time frame of any fiscal year and includes additional depreciation in addition to the standard depreciation.

The table for understanding requirements is below.

Note: – System should be capable of posting deprecation in real time during transaction posting and depreciation run in SAP, in addition to calculating deprecation as per the below table.

Business Scenario Solution No. 1
Start by configuring the depreciation keys to the percentage combinations shown in the above table, such as 15%, 35%, 30%, and 50%, and then, after creating the asset code with the T-code AS01, move on to the mode for changing the asset code. Use the interval option in the “depreciation area” tab of AS02 to make the necessary changes in accordance with the needs of the business process.

An illustration will help you comprehend this.
Create a fixed asset code with asset class of “Mould & Dies” & simply for a scenario understanding consider asset purchase date / depreciation start date as 17.06.2020 (Before Sept. 2019) & correspondingly make necessary adjustments in deprecation area tab.

Depreciation key configured for 50% should be chosen because the first year will be 50%. To do this, double-click on “JC50” and then click on

According to the law, if the asset is acquired or put into use on or before September 30th of any fiscal year, the depreciation should be fixed at 50% for the first year and at 30% for all following years.

Since the asset in our test scenario was acquired on June 17, 2020, we will adjust the interval appropriately.

Click now on

In our test scenario, the start date of the following fiscal year, or 01.04.2021, should be entered here as the next interval date from which the depreciation % should change in accordance with law. JC30 for 30%.

To check the deprecation computation according to the business context, save this data, carry on with the purchase/settlement transaction, and then go to T-code AW01N.

Please take note that we would have made three intervals in accordance with the business scenario table above if the asset purchase or settlement occurred on a date that is later than September 30, 2020.

Go to the t-code AS03 (Asset Values Tab) or AW01N after submitting the purchase/settlement transaction at this point.

As noted in the graphic above, depreciation is estimated to reach $50,000 for the first fiscal year, which is 2020.

(Asset acquisition value – $100,000*50% = $500,000) & for fiscal year 2021 it is 15,000 (NBV $50,000*30% = 15,000; same 30% is calculated in all subsequent years as required by law).

How this is done / Modifications applied to SAP (Master/Config)
No configuration changes other than the initial generation of percentage-wise deprecation keys are required; all updates must be made at the asset master data level as demonstrated in the example above.

Business Scenario #2: When selling assets, it is not permitted to take current year depreciation into account.
In an ideal scenario, asset depreciation would be calculated on a pro rata basis up to the last date of the sale or scrap transaction along with the gain or loss on the asset sale. However, in a partnership firm business scenario, taking current year depreciation (which is an accumulated depreciation of the current year of a particular asset) is prohibited by law.

The table for requirement comprehension can be found below.

Note: – System should be capable of uploading deprecation in real time during transaction posting and depreciation run in SAP in addition to calculating deprecation as per the below table.

Business Scenario 2 Solution
Consider a fixed asset that was purchased a few years ago. Its net book value (NBV) as of 31.03.2020 is Rs. 1,00,000, and in our test example, we plan to sell the asset on 10.01.2021; therefore, in an ideal business case, the accumulated depreciation should have been calculated up until 09.01.2021, or from 01.04.2020 to 09.01.2021, and gain/loss derivation should have worked out taking sale value into account.

However, as was previously stated, the law forbids this accumulated depreciation as of the sale date. Accordingly, the example following uses a sale value of Rs. 90,000.

The asset’s net book value as of March 31, 2020 was $100,000, and on January 10, 2021, it is sold for $100,000. A loss on sale of $10,000 is recorded, with no entries for depreciation or accumulated depreciation.

*The years indicated above are only used as an example for clarification. *

How this is done / Modifications applied to SAP (Master/Config)
eliminated “Dep. to the day” tick at a configuration update or key deprecation level.

the T-code AFAMA

Depreciation computation in the first year after asset purchase or acquisition is Business Scenario 3.
In an ideal asset purchase scenario, it is fairly straightforward that the depreciation should begin accordingly from the date of purchase/put to use, i.e. on a pro-rata basis from that specific date or month. However, this is not the case with the partnership firms asset purchase business scenario; according to the law, the calculation of deprecation varies with respect to its purchase happened within a horizon of 180 days in any fiscal year before September 30th & after Sept. 30th.

The table for understanding requirements is below.

Note: – System should be capable of posting deprecation in real time during transaction posting and depreciation run in SAP, in addition to calculating deprecation as per the below table.

Depreciation computation in the first year after asset purchase or acquisition is Business Scenario 3.
Business Scenario Solution No. 3
3.1 Asset purchase or acquisition on or before June 16, 2020, or before September 30

Note: Although the asset was acquired or settled on 16.06.2020 as seen in the two screenshots above, the depreciation start date is selected as 01.04.2020 below. This is done in compliance with law, and the date was chosen automatically using a standard functionality.

To view the depreciation computation, select “Asset values” now.

As seen in the screenshot above, despite the asset having been purchased on June 16, 2020 for Rs. 51,155 with a 30% (JC30 Dep. The full year depreciation rate (51,555*30%=15,346.52) was estimated, starting on April 1, 2020, rather than on a pro rata basis.

3.2 Purchasing or acquiring an asset on or after September 30, 2021

Note: Although the asset was acquired or settled on 18.03.2021 in the two screenshots above, the depreciation start date is selected as 01.10.2020 in the deprecation area. This is done in compliance with the legislation, and the date was chosen automatically using a standard functionality.

To view the depreciation computation, select “Asset values” now.

As observed above, despite the asset being acquired on March 18, 2021, and having a value of Rs. Depreciation is calculated beginning on October 1, 2020, at a rate of 11000 ($55,500*40%*6/12), and from that point on, it is calculated at 17,600 ($44,400*40%).

How this is done / Modifications applied to SAP (Master/Config)
Replaced period control in all deprecation keys

the T-code AFAMA

Conclusion
Please take note that, similar to the other two business scenario solutions, I also explored and tested other depreciation parameters using a trial-and-error methodology for this specific requirement. I eventually discovered that the period control “IN1” that SAP by default delivers to be used for Indian IT act deprecation (ideally used for IT dep reporting by Private/Public Ltd companies) is functioning exactly as required by Indian part.

Since our customer needed to comply with statutory as well as P&L posting business requirements, I substituted period control with “IN1” in all of our deprecation keys, and it works perfectly.