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Additional Depreciation – Who can Avail?, availability, Rate of Add Dep.

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Additional Depreciation – Who can Avail?, availability, Rate of Additional Depreciation. Everything you want to know about Additional Depreciation. Check Complete details for Additional Depreciation. Additional depreciation, as the name suggests, refers to depreciation which can be claimed under section 32 (1) (ilia), in addition to depreciation allowance as under section 32(1). Now check more details from below…

Who can avail additional depreciation?

The assessee who is engaged in manufacture or production of any article or a thing would be eligible to avail of additional depreciation.

A Special point to be noted would be that even printing, and or, publishing activity is deemed to be covered hereunder. Hence, this business would be eligible to avail of the additional depreciation.

Starting from the financial year 2016-17, additional-depreciation is also allowed to the business of generation and distribution of power. However, availing of additional depreciation by the business of generation and distribution of power is not available if such business is following straight-line depreciation method.

Additional depreciation availability

Additional-depreciation is allowed only on new machinery or plant in above businesses.

However, such machinery and plants shall exclude any aircraft or ships purchased and installed after 31st March 2005.

Rate of additional depreciation

  • Additional depreciation allowed @ 20% of the cost of assets.
  • Additional depreciation will be allowed @ 35%, where the eligible assessee is engaged in manufacture or production of any article or thing in notified backward areas.

However, such notified backward areas are situated in Andhra Pradesh, Bihar, Telangana, and West Bengal.

There are conditions for availing such enhanced rate for additional-depreciation

  • the machinery or plant should have been purchased and installed during April 1st, 2015 till March 31st, 2020
  • The manufacturing unit is to be set up on or after 1st April 2015.

If assets are used for less than 180 days then

  1. Additional depreciation would be available at the half of rate than that allowed, which would be 10% or 17.5% in the year of acquisition.
  2. Starting from the financial year 2015-16, rest of half additional-depreciation which is equal to 10% or 17.5% of any relevant year, would be allowed in the next financial year.

Items on which additional depreciation are not allowed

  • Plant and machinery which is already used (whether in India or outside) before installation by the assessee.
  • Office appliances like furniture etc.
  • Road transport vehicle
  • New or second-hand machine or plant installed in office premises or residential premises or accommodation. This even excludes such installation in guest houses also.
  • Plant and machinery, for which actual cost is allowed as deduction while computing income from the business for any previous year.
  • 100% depreciable assets.
  • Dealers or service providers with respect to power generation and distribution.
  • Where assessee engaged in generation and distribution of power follows straight-line method for depreciation.

Example

Industrial unit acquired new assets costing Rs.100000, in the month of January 2016. The normal depreciation rate is assumed to be 10%.

Hence,

Additional-depreciation  (for the financial year 2015-16) = 100000 X 20% X 6/12 = 10000

Additional-depreciation  (for the financial year 2016-17) = 100000 X 20% X 6/12 = 10000

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About Yash Shah

Yash Shah is passionate article writer and has written more than 100 articles in the field of Finance, Insurance, Stock Market, Company Law, Auditing, Taxation and many others. In case of any queries or suggestions, you can reach the author @ [email protected], you can also catch him on facebook @ yashshah299

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