Investment Allowance for tax laws and procedure (Section 32AC)

Investment Allowance (Section 32AC)

A deduction for investment in new plants and machinery is authorized under section 32AC. Apart from depreciation and further depreciation, this deduction is allowable.

It is an opportunity for the purchase and installation by a production business of new plants and machinery. This is an opportunity implemented in the 1961 Income Tax Act to encourage investment by manufacturing firms in modern and high-value plants and machinery. The acquisition and installation had to be carried out from 1 April 2013 until 31 March 2015. The clause has also been updated to include the deduction in the 2016-17 FY.

The deduction is an investment-linked deduction i.e. the deduction is allowed as a percentage to the investment amount.

15% of the total cost of the plant and equipment that a manufacturing company acquires and implements and the value of the investment must exceed Rs. For Yearse, one hundred Crores combined. 2013-14 FY and 2014-15 FY. However, if the investment sum exceeds Rs, the clause was further amended to allow for the deduction in FY 2016-17. Five Crores Twenty.

Explanation of the provisions of Section 32AC after amendment-

FY 2013-14 + FY 2014-15: 15% Deduction if Assets > 100 Crores
FY 2014-15 or FY 2015-16 or FY 2016-17: 15% Deduction if Assets > 25 Crores in 1 year

Note: Assessee is allowed to claim any 1 of the two options.

Section 32AC has certain conditions attached to it which are as follows:

If machinery purchased but not installed then-No no deduction is allowed which was later amended to the deduction allowed in the year in which the machinery is being installed.

The deduction is only available to manufacturing companies on the installation of new machinery.

The deduction is only available to companies and not to the partnership or proprietorship.

The deduction is only for factories or power generation units which produce article or thing and not to the dealers or service providers.

No Investment Allowance is allowed for the following Plant and Machinery:

Ships and Aircrafts
Second-hand Plant and Machinery
Office Appliances
Road Transport Vehicles like Car etc.
100% Depreciable Assets like pollution control equipment

The assessee shall remain with such plant and machinery for the next 5 years from the date of installation, i.e. the plant and machinery can not be sold or otherwise moved for a period of 5 years from the date of installation. If transferred or sold, then in the year of transfer, the deduction otherwise permitted to the assessee will be taxable as business income. The transition could, however, be made to the amalgamated or demerged firm under amalgamation or demerger.

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