Additional Depreciation:
- If an assessee engaged in the business of manufacture of any article or generation transmission or distribution of power, then additional depreciation is applicable @20% allowed on Plant & Machinery.
- Additional depreciation is applicable only for using WDV method and not for the SLM method.
- Additional Depreciation is only on Plant and Machinery and not other assets like Furniture and Buildings.
On the following Plant and Machinery (P&M) no Additional Depreciation can be claimed-
- Ships and Aircrafts
- Second hand or used P & M
- P & M used in office/Home/Guesthouse
- Office Appliances
- Road Transport Vehicles(Car etc)
- 100% Depreciable Assets (like Pollution Control Equipments)
Additional Depreciation is only for factories or power generation units, not for dealer or service providers.
Additional deprection is allowed only in the first year in which it is put to use. If put to use for less than 180 days then 10% depreciation shall be allowed.
The remaining 10% shall be allowed in the next year.
Computation:
- For Machinery, General Rate of Depreciation is 15%. In addition, 20% Depreciation will be available in the first year for Industrial Undertaking and Power Generation Distribution business. Hence, total 15%+20%=35% Depreciation will be available in the first year.
- However, if assets used for less than 180 days, then ½ of 35%(15%Normal Dep +20% Additional Dep) will be available.
- Balance half of both Normal and Additional Depreciation can be claimed in next year.
Example
Onlinesolves Ltd., a manufacturing concern, furnishes the following particulars:
- Opening Written Down Value (WDV) of plant and machinery as on 1.4.2022 is Rs. 10,00,000
- New plant and machinery purchased and put to use on 08.06.2022 – Rs. 15,00,000
- New plant and machinery acquired and put to use on 15.12.2022 – Rs. 10,00,000
- Computer acquired and installed in the office premises on 2.1.2023 – Rs. 5,00,000
The amount of depreciation and additional depreciation under Income Tax Act for the A.Y. 2023-24 is computed as follows-
There are 2 blocks namely,
Plant and Machinery: Depreciation Rate 15%
Computer: Depreciation Rate 60%
However, Additional depreciation is available only on Plant and Machinery Full 20% Additional Depreciation on P&M acquired on 08.06.2022 will be available and 10% Depreciation on P&M acquired on 15.12.2022
| Name of Asset | Block 1 Machine | Block 2 Computer |
|---|---|---|
| Depreciation Rate | 15% | 40% |
| Opening Value (Rs.) | 10,00,000 | 0 |
| Add:Purchases 180 days or more | 15,00,000 | 0 |
| Add:Purchase Less than 180 days | 10,00,000 | 5,00,000 |
| Less – Sales During Year | 0 | 0 |
| Closing Value before Depreciation | 35,00,000 | 5,00,000 |
| Depreciation | [(10,00,000 + 15,00,000)*15%] + [(10,00,000)*7.5%]= 450000 | (5,00,000)*40%=2,00,000 |
| Additional Depreciation | [(15,00,000)*20% + (10,00,000)*10%]= 4,00,000 | 0 |
| Closing WDV (after Depreciation) | 26,50,000 | 3,00,000 |
