Apart from normal depreciation and additional depreciation, Investment Allowance is also available on new machinery installed during 2013-14(FY/PY) and 2014-15
Amt of Deduction:-
- It is 15% of new machines purchased and /or installed (New Amendment) in one year is more than 25 Crores
- This Investment Allowance is only for FY 2014-15,FY 2015-16 AND FY 2016-17 (FY means Financial year)
- Earlier It was 15% of new machines installed in FY 2013-14 and FY 2014-15 if aggregate of machine cost exceeds 100 Cr total of both years combined.
- Unlike Additional depreciation.Investment Allowance is not reduced while calculating Closing WDV
Effect of Amendment
EARLIER |
NOW |
Assets more than 25 cr must be purchased and installed in Same Year to Get Investment Allowance Deduction |
Assets more than 25 cr must be purchased in FY 2014-15,FY 2015-16.FY 2016-17 It may be installed later also till 31.3.2017 Still deduction will be available |
If purchased but not installed then no Investment Allowance Suppose Asset purchased for 100 Cr in FY 2015-16 but installed in FY 2016-17 Then NO Deduction will be available as not installed in same year |
Deduction Available in the Year Installed Suppose Asset purchased for 100 Cr in FY 2015-16 but installed in FY 2016-17 Then 15% Deduction will be Available in FY 2016-17 |
Current Provisons
EARLIER | NOW | ||
FY 2013-14 + FY 2014-15 |
15% Deduction if Assets >100 Crores |
Option 1 FY 2013-14 + FY 2014-15 |
15% Deduction if Assets >100 Crores |
Option 2 FY 2014-15 Or FY 2015-16 Or FY 2016-17 |
15% Deduction if Assets >25 Crores in 1 year |
Assessee can claim either of Option 1 or Option 2 and not both
Format
Depreciation and Deduction Computation
Name of Asset | Block 1 Machine |
Opening Value | xx |
Add | |
Purchases 180 days or more | xx |
Purchase Less than 180 days | xx |
Less | |
Sales During Year | xx |
Cl Value before Dep | xx |
Less | |
Depreciation | xx |
Additional Dep | xx |
Closing WDV(after Dep) | xx |
Investment Allowance @ 15% | |
(not reduced from Closing WDV) | xx |
PGBP Computation
Indirect Method | Amount in Crores |
Profit | xx |
Add | |
Expense disallowed | |
Dep as per Companied Act | xx |
Less | |
Expense Allowed | |
Dep as per Income Tax | xx |
Additional Depreciation | xx |
Investment Allowance | xx |
PGBP Income | xx |
Conditions to Claim Investment Allowance
1.It is available only on purchase of new machinery.
Additional Depreciation is only on Plant and Machinery,not other assets like Furniture and Buildings
2. On Following Plant and Machinery also(P&M), no Investment Allowance
- Ships and Aircrafts
- Second hand P& M
- P& M used in Office/Home/Guest house
- Office Appliances
- Road Transport Vehicles (Car etc)
- 100% Dep reciable Assets (like Pollution Control Equipment)
3.I nvestment Allowance is only for factories or power generation units, not for dealers or service providers
4 It is only available to manufacturing companies on new machines installed.
5 Deduction only for Companies(not for Non Companies like Partnership/Proprietorship)
Que 1
Compute Deduction for 2013-14 and 2014-15 in following cases
Case | 2013-14 | 2014-15 |
I | 80 | 20 |
II | 80 | 21 |
III | 110 | 20 |
IV | 110 | 1 |
V | 5 | 25 |
VI | 5 | 26 |
Case | 2013-14 | 2014-15 | Total | Deduction in 2013-14 | Deduction in 2014-15 |
I | 80 | 20 | 100 | No deduction in 2013-14 as amount does not exceed 100 Crores | No deduction as total amt does not exceed 100 Crores,as well as individual amount in 2014-15 is not more than 25 Crores |
II | 80 | 21 | 101 | No deduction in 2013-14 as amount does not exceed 100 Crores | Deduction available as total amt exceeds 100 Crores.Amt of deduction-101x15%=15.15 Crores |
III | 110 | 20 | 130 | Deduction in 2013-14 available as amount exceeded 100 Crores.Amt of Deduction=110*15%=16.5 Crores | Deduction available as total amt exceeds 100 Crores of both years combined,.Amt of deduction-130x15%=19.5 Crores less already claimed 16.5 Crores=3 Crores |
IV | 110 | 1 | 111 | Deduction in 2013-14 available as amount exceeded 100 Crores.Amt of Deduction=110*15%=16.5 Crores | Deduction available as total amt exceeds 100 Crores of both years combined,.Amt of deduction-111x15%=16.65 Crores less already claimed 16.5 Crores=0.15 Crores |
V | 5 | 25 | 30 | No deduction as Purchase amt less than 100 Crores | No deduction as total amt in 2013-14 and 2014-15 does not exceed 100 Crores,as well as individual amount in 2014-15 is not more than 25 Crores |
VI | 5 | 26 | 31 | No deduction as Purchase amt less than 100 Crores | Deduction available on 26 Crores @15%=3.9 Crores |
Q2 Compute Admissible deduction u/s 32 AC
Company Name |
2013-14 (AY 2014-15) |
2014-15 (AY 2015-16) |
A | 80 | 22 |
B | 70 | 25 |
C | 60 | 30 |
D | 75 | 25 |
E | 105 | 15 |
F | 70 | 30 |
G | 70 | 40 |
View Answer
Company Name | 2013-14 (AY 2014-15) | 2014-15 (AY 2015-16) | Deduction in 2013-14 | TOTAL PUR OF BOTH YEARS | Deduction in 2014-15 | Explanation 2013-14 | Explanation 2014-15 |
A | 80 | 22 | 0 | 102 | 15.3 | No deduction in 2013-14 as amount does not exceed 100 Crores | Deduction available as total amt exceeds 100 Crores of both years combned,.Amt of deduction-102x15%=15.3 Crores less already claimed 0 =15.3 Crores Crores |
B | 70 | 25 | 0 | 95 | 0 | No deduction in 2013-14 as amount does not exceed 100 Crores | No deduction as total amt in 2013-14 and 2014-15 does not exceed 100 Crores,as well as individual amount in 2014-15 is not more than 25 Crores |
C | 60 | 30 | 0 | 90 | 4.5 | No deduction in 2013-14 as amount does not exceed 100 Crores | No deduction on whole 90 Crores as it does not exceeds 100 Crores of both years combned, However deduction of 30 Crores as it is more than 25 Crores Amt of deduction-30x15%=4.5 Crores |
D | 75 | 25 | 0 | 100 | 0 | No deduction in 2013-14 as amount does not exceed 100 Crores | No deduction as total amt in 2013-14 and 2014-15 does not exceed 100 Crores,as well as individual amount in 2014-15 is not more than 25 Crores |
E | 105 | 15 | 15.75 | 120 | 2.25 | Deduction Available=105*15%=15.75 Crores | Deduction available as total amt exceeds 100 Crores of both years combined,.Amt of deduction-120x15%=18 Crores less already claimed 15.75 Crores=2.25 Crores |
F | 70 | 30 | 0 | 100 | 4.5 | No deduction in 2013-14 as amount does not exceed 100 Crores | No deduction on whole 90 Crores as it does not exceeds 100 Crores of both years combned, However deduction of 30 Crores as it is more than 25 Crores Amt of deduction-30x15%=4.5 Crores |
G | 70 | 40 | 0 | 110 | 16.5 | No deduction in 2013-14 as amount does not exceed 100 Crores | Deduction available as total amt exceeds 100 Crores of both years combned,.Amt of deduction-110x15%=16.5 Crores less already claimed 0 Crores=16.5 Crores |
Q3
Particulars | Amt (in Crores) |
Income | 90 |
Expenses | 40 |
Profit | 50 |
Suppose Expenses Include Dep on Machine charged of 4 Crores as per Companied Act (New Machine Purchased for 40 Crores on 10 April,Dep @ 10%=4 Crores
View Answer
Indirect Method | Amount in Crores |
Profit | 50 |
Add | |
Expense disallowed | |
Dep as per Companied Act | 4 |
Less | |
Expense Allowed | |
Dep as per Income Tax | 6 |
(15%*40) | |
Additional Depreciation | 8 |
(20%*40) | |
Investment Allowance | 6 |
(15%*40) | |
PGBP Income | 34 |