Depreciation Rates for Companies Restricted at 40% under Income Tax: CBDT

CBDT Amends IT Rules; restricts depreciation rate at 40% for Newly set-up Domestic Manufacturing Companies opting 25% corporate tax rate w.e.f. 1 Apr. 2016 and for Others w.e.f. 1 Apr. 2017

CBDT has amended Income Tax Rules relating to depreciation rates as per Income Tax. New proviso to Rule 5(1) restricts depreciation claim at 40% for Newly set-up domestic manufacturing companies opting corporate tax rate @25% u/s 115BA(4), w.e.f. 1 Apr. 2016. However, depreciation rate under Income Tax for other companies has been capped at 40% w.e.f. 1 Apr. 2017.

CBDT Notification No. 103/2016 dt. 7 Nov. 2016

S.O. 3399(E): In exercise of the powers conferred by section 32, section 115BA and section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes, hereby, makes the following rules further to amend the Income-tax Rules, 1962, namely:-

(1) These rules may be called the Income-tax (29th Amendment) Rules, 2016.

(2) In the Income-tax Rules, 1962 (here after referred to as the principal rules),-

(a) in rule 5, after sub-rule (1), the following proviso shall be inserted with effect from 1st day of April, 2016, namely:-

“Provided that in case of a domestic company which has exercised option under sub-section (4) of section 115BA, the allowance under clause (ii) of sub-section (1) of section 32 in respect of depreciation of any block of assets entitled to more than forty per cent. shall be restricted to forty per cent. on the written down value of such block of assets.”

(b) in the New Appendix I, in the Table, in the second column, for the figures “ ‘50’, ‘60’, ‘80’, ‘100’ ”, wherever they occur, the figure “40” shall be substituted with effect from the 1st day of April, 2017.

Note : The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii) vide notification number S.O. 969 (E), dated the 26th March, 1962 and last amended by the Income-tax (28th Amendment) Rules, 2016, vide notification number G.S.R No.982(E),dated the 17.10.2016.

Leave a Reply