To give Incentive to Manufacturing,Income Tax Dept gives Additional depreciation of 20% for new plants and machinery installed during the year of purchase
This is in addition to normal depreciation
Section 32(1) (iia)
Additional Depreciation @ 20%
is available in first year of purchase
for
- An Industrial Undertaking
- For Assessees engaged in Power Generation Business Only
- For Assessees engaged in Power Generation and Distribution Business Only
- For Assesses engaged in Power Transmission Business (New Amendment)
On
New plant and machinery installed ( after 31.3.05)
| EARLIER | NOW |
Additional Depreciation @ 20%
is available in
first year of purchase
for
|
Additional Depreciation @ 20%
is available in
first year of purchase
for
|
In Case, Asset used for less than 180 days,
then half depreciation i,e,
1/2 of 20% i.e.10% Depreciation available
(Balance 50% of Additional Depreciation can be claimed in next year)
(New third proviso to section 32(1)(ii) )
NON Applicability
1 . Additional Depreciation is only on Plant and Machinery, not other assets like Furniture and Buildings
2 . On Following Plant and Machinery(P&M) also, no Additional Deprecation
- Ships and Aircrafts
- Second hand P& M
- P& M used in Office/Home/Guest house
- Office Appliances
- Road Transport Vehicles(Car etc)
- 100% Depreciable Assets (like Pollution Control Equipments)
3. Additional Depreciation is only for factories or power generation units, not for dealers or service providers
For Machinery,General Rate of Depreciation is 15%.In addition,20% Depreciation will be available in first year for Industrial Undertaking and Power Generation Distribution business.Hence ,total 15%+20%= 35% Depreciation will be available in first year
However,if asset used for less than 180 days,then 1/2 of 35% (15%Normal Dep +20% Additional Dep) will be available
Balance half of both Normal and Additional Deprecation will now be available in next year
FORMAT
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
PGBP Computation
Indirect Method Amount in Crores Profit xx Add Expense disallowed Dep Charged in Profit and Loss
(as per Companies Act)
xx Less Expense Allowed Dep as per Income Tax xx Additional Depreciation @ 20% xx PGBP Income xx
Example:
XYZ Ltd., a manufacturing concern, furnishes the following particulars:
1) Opening WDV of plant and machinery as on 1.4.2018 30,00,000
(2) New plant and machinery purchased and put to use on 08.06.2018 20,00,000
(3) New plant and machinery acquired and put to use on 15.12.2018 8,00,000
(4) Computer acquired and installed in the office premises on 2.1.2019 3,00,000
Compute the amount of depreciation and additional depreciation as per the Income-tax Act, 1961 for the A.Y. 2019-20
View answer
Important Points
There are 2 blocks
Plant and Machinery :- Dep Rate 15%
Computer :- Dep Rate 40%
However,Additional depreciation is available only on Plant and Machinery
Full 20% Additional Dep on P&M acquired on 08.06.2018 and
10% Dep on P&M acquired on 15.12.2018
It is not available on computers as it is used in office.
| Name of Asset | Block 1 Machine | Block 2 Computer |
| Dep Rate | 15% | 40% |
| Opening Value | 3000000 | 0 |
| Add | ||
| Purchases 180 days or more | 2000000 | |
| Purchase Less than 180 days | 800000 | 300000 |
| Less | ||
| Sales During Year | 0 | 0 |
| Cl Value before Dep | 5800000 | 300000 |
| Depreciation | 810000 | 60000 |
|
(3000000+2000000)*15% +800000*15%*1/2 |
300000*40%*1/2 | |
| Additional Dep | 480000 | 0 |
| (2000000*20%)+(800000*10%) | (Used in Office) | |
| Closing WDV (after Dep) | 4510000 | 240000 |