Concept of Additional Depreciation

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

1. An Industrial Undertaking 
2. For Assessees engaged in Power Generation  Business Only
3. For Assessees engaged in Power Generation and Distribution Business Only
4. For Assesses engaged in Power Transmission Business (New Amendment)

On

New plant and machinery installed ( after 31.3.05)

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