The value of any property asset is calculated on the basis of the property prices as well as by adding the value of furniture and other amenities. And the taxation is done on the basis of this value only. Now, as the time passes, and with usage, these amenities tend to deteriorate in condition and may require repairs or even replacements.
The replacements or repairs have an added financial burden on the owner, but at the same time, the taxation still is done at the same rates. This is unjustified on the part of the property owners. The government and the taxation authorities also understand this fact and therefore try to make up for this.
What is wear and tear allowance?
Wear and tear allowance aims at giving the property owners some respite from the extra monetary load over them in the form of taxation as well as the replacement of the amenities. This allowance is calculated as 10 % of the total amount that is earned through renting the property during the year.
The items that have been made available by the property owner in the rent agreement are covered under this allowance. These items include furniture, electrical appliances like fridge, lines, etc. This allowance can also be availed by the commercial property owners who require replacing the worn out items over time.
This allowance is a strictly taxpayer-centric one as it makes sure that the maximum benefit is passed on to the taxpayers and there are little chances of overtaxing.