Any software purchased needs to be capitalized if it can be
identified as a separate asset. In case it is purchased
along with the computer & the value is inseparable, it can
be added to the cost of the computer, but if it's purchased
subsequently, it needs to be accounted as a separate asset.
However, if it's going to be installed on a particular
computer system, it can be added to the value of that
computer also (Software will become an integral part of that
However, if the value of each software is not exceeding
Rs.5000/-, 100% depreciation can be claimed in the year of
purchase & put to use.
cost of new software(if forming indispensible part of asset) if bought along with computer should added to computer's cost n thus both to be capitalized.If bought separately then also it should be capitalized.BUT if it is a routine activity to renew the software every year,then it should be debited to p&l account.AND in case of companies,software bought below rs. 5,000 can be 100% depreciated after being capitalized.