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CS Executive · Tax Laws and Practice · Profits and Gains from Business and Profession

Meera Textiles, a manufacturer, acquires and installs new machinery costing ₹20,00,000 and first puts it to use for 120 days in the tax year 2026-27. Under the additional depreciation provisions of the Income-tax Act, 2025, what additional deduction is allowed in 2026-27 and in 2027-28 respectively?

The additional deduction is ₹2,00,000 in 2026-27 and ₹2,00,000 in 2027-28. Because the machinery was used for fewer than 180 days, additional depreciation is split into 10% of actual cost in the acquisition year and the remaining 10% in the following year.

  1. A₹4,00,000 in 2026-27 and nil in 2027-28
  2. B₹2,00,000 in 2026-27 and ₹2,00,000 in 2027-28Correct
  3. C₹2,00,000 in 2026-27 and ₹4,00,000 in 2027-28
  4. DNil in 2026-27 and ₹4,00,000 in 2027-28

Explanation

The machinery was put to use for less than 180 days, so 10% of actual cost is allowed in the year of acquisition and 10% in the next tax year. 10% of ₹20,00,000 is ₹2,00,000 in each year. The ₹4,00,000 option applies the 20% rate in the first year, which is available only when use is 180 days or more.

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