Additional Depreciation: Deduction from Business Income under Income Tax

Deduction for Additional Depreciation under Income Tax

Section 32 of Income Tax provides for additional depreciation equal to 20% of actual cost in the case of any new machinery and plant (other than ships and aircraft) acquired and installed after 31.03.2005 by the assessee.

Normal Additional Depreciation @20%: Section 32(1)(iia)

Section 32(1)(iia) of the Income Tax Act, 1961 provides for additional depreciation in the case of any new machinery and plant (other than ships and aircraft). Additional depreciation equal to 20% of actual cost shall be allowed as further deduction provided such machinery and plant has been acquired and installed after 31.03.2005 by the assessee engaged in the:

– business of manufacture; or

– production of any article or a thing; or

– in the business of generation or generation and distribution of power

Enhanced Additional Depreciation @35% in Backward Areas: Section 32(1)(iia)(i)

Section 32(1)(iia)(i) provides for allowing deduction for enhanced additional depreciation @35% [instead of @20% under Section 32(1)(iia)] for new machinery or plant (other than ships and aircraft) of an undertakings or enterprises newly set up for manufacture or production of any article or thing on or after the 1st day of April, 2015 (until 31 March 2020) in the backward areas notified by the Central Govt. (i.e. the State of Andhra Pradesh, Bihar, Telangana & West Bengal).

Additional Depreciation Not Applicable/ Allowed/ Eligible

Section 32(1)(iia)(ii) provides that deduction for normal or enhanced additional depreciation shall not be allowed in the following cases:

i) any second hand or previously used machinery or plant;

ii) any machinery or plant installed in any office premises, residential accommodation, guest-house, etc.

iii) any office appliances or road transport vehicles; or

iv) any machinery or plant, whole actual cost of which is allowed as a deduction (as depreciation or otherwise) in computing the PGBP of any one previous year.

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