Which method of calculating depreciation is recognized by Income Tax Law?

Written Down Value Method

The correct answer is option 2- Written Down Value Method.

Written Down Value Method is the method in which depreciation is charged on the book value of the asset. Since book value keeps on reducing by the annual charge of depreciation, it is also known as ‘reducing balance method’. This method involves the application of a pre-determined proportion/percentage of the book value of the asset at the beginning of every accounting period, so as to calculate the amount of depreciation. The amount of depreciation reduces year after year. Straight line method is not recognised by Income Tax Law while written down value method is recognised by the Income Tax Law.