# Additional Depreciation - Section 32(1)(iia)

## Scope

Additional depreciation is a one-time benefit (over and above normal depreciation) granted to incentivise capital investment in manufacturing and power sectors.

## Eligibility Criteria

### Asset Eligible

Only Plant & Machinery (not building, furniture, or intangibles).

### Assessee Eligible

Assessee must be engaged in the business of:

Manufacture or production of any article or thing, OR
Generation, distribution, or transmission of power

### Rate of Additional Depreciation

20% of actual cost

## Key Conditions

1. First year only — additional depreciation is allowed only in the year of acquisition.

2. Half-rate rule applies:

If asset used less than 180 days in first year → 10% allowed in current year
The balance 10% is allowed in the next year

3. Method: Not available under SLM.

## Industries Treated as Manufacturing

Printing, OR Printing and Publishing of Books — considered as manufacturing/production for this section.

## Assets/Situations EXCLUDED

Additional depreciation is NOT allowed on:

1. Second-hand plant & machinery

2. P&M installed in office premises or residential accommodation (including guest houses)

3. Ships, Aircraft, and Transportation Vehicles

4. P&M on which 100% deduction is allowed (e.g., under Sec 35AD)

## Special Clarifications

### Forklift Trucks

Forklift used in a factory → NOT a transport vehicle → Additional depreciation ALLOWED.

### Computers

Location	Treatment
Office	Additional depreciation NOT allowed
Factory	Additional depreciation ALLOWED

Worked example

### Example 1

Example: PQR Ltd., a manufacturer, purchases new machinery for ₹50,00,000 on 1st August 2024 and puts it to use immediately.

Treatment:

Normal depreciation: 15% × ₹50,00,000 = ₹7,50,000
Additional depreciation: 20% × ₹50,00,000 = ₹10,00,000
Total depreciation = ₹17,50,000

### Example 2

Example: Same as above, but machinery purchased on 1st November 2024 (used for less than 180 days).

Treatment:

Normal depreciation: 15% × ½ × ₹50,00,000 = ₹3,75,000
Additional depreciation (PY 2024-25): 20% × ½ × ₹50,00,000 = ₹5,00,000
Balance 10% additional depreciation = ₹5,00,000 allowed in PY 2025-26

### Example 3

Example: A trading company (not manufacturing) buys a new computer for the office for ₹2,00,000.

Treatment: No additional depreciation — assessee is not a manufacturer, and the asset is in an office. Only normal depreciation at 40% applies.

⚠️ Common exam mistakes

Claiming additional depreciation on second-hand machinery — not eligible.
Claiming additional depreciation on building or furniture — only for Plant & Machinery.
Allowing additional depreciation to non-manufacturers (e.g., traders, service providers other than power sector).
Allowing additional depreciation on motor vehicles like trucks/cars used for transportation — excluded.
Forgetting to carry forward the balance 10% to the next year when used for less than 180 days.
Allowing additional depreciation under SLM — only WDV.
Allowing additional depreciation on computers installed in the office (allowed only if installed in factory).

Bare-Act text Section 32(1)(iia) · Income-tax Act, 1961 · click to expand

Section 32(1)(iia): In the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing or in the business of generation, transmission or distribution of power, a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction.

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Additional Depreciation under Section 32(1)(iia)

Worked example

⚠️ Common exam mistakes