India 
Canada
Additional depreciation is a tax incentive provided under Section 32 of the Income Tax Act, 1961, aimed at encouraging businesses to invest in new machinery and equipment. This additional depreciation allows businesses to claim an extra percentage of depreciation on top of the regular depreciation for eligible assets.
Key Features of Additional Depreciation
Eligibility Criteria:
- The asset must be new and not previously used.
- It should be acquired and installed after March 31, 2005.
- The asset must be utilized for business purposes for a minimum number of days during the financial year.
Depreciation Rates:
- Standard Rate: A one-time additional depreciation of 20% of the actual cost is allowed if the asset is put to use for 180 days or more in the year of acquisition. If used for less than 180 days, only 10% can be claimed in that year, with the remaining 10% available in the following year.
- Special Cases:
- For assets acquired in specified backward areas of the State of Andhra Pradesh or the State of Bihar or the State of Telangana or the State of West Bengal on or after the 1st day of April, 2015, a higher rate of 35% may apply. This higher additional depreciation shall be available in respect of acquisition and installation of any new machinery or plant for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020.
- Additional depreciation is also available for businesses engaged in power generation, transmission, and distribution.
Claiming Additional Depreciation
To successfully claim additional depreciation, businesses should follow these steps:
1. Determine Eligibility: Verify if the asset qualifies under the criteria set by the Income Tax Act.
2. Maintain Records: Keep detailed records of asset acquisition, installation, invoices, and proof of payment.
3. Calculate Depreciation: Compute both regular and additional depreciation using applicable rates.
4. File Tax Returns: Include calculated depreciation in tax returns while ensuring compliance with all tax regulations.
Conclusion
Additional depreciation serves as a significant tax benefit for businesses investing in new machinery and equipment, thereby promoting capital investment and enhancing productivity. Understanding the eligibility criteria and proper documentation is crucial for effectively claiming this benefit under the Income Tax Act.
For more details, reach out to Corporate Genie Expert on +91-8700202997 or visit our website www.corporategenie.in
