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If eligible new machinery is used for business for fewer than 180 days in the year it is acquired and installed, calculate the full additional-depreciation pool at 20% of eligible actual cost, claim only half of that pool in the first year, and claim the remaining half in the immediately succeeding previous year. In effect, each year’s deduction is normally 10% of eligible actual cost. For example, eligible cost of ₹10,00,000 creates a ₹2,00,000 pool: ₹1,00,000 in the first year and ₹1,00,000 in the next.
This calculation applies only after the asset passes the section 32(1)(iia) eligibility tests and the relevant assessment-year wording has been checked.
What “balance additional depreciation” means
Additional depreciation is a separate deduction for qualifying new plant or machinery. Section 32(1)(iia) sets the standard additional-depreciation rate at 20% of the asset’s eligible actual cost. The fewer-than-180-days rule does not reduce the asset’s ultimate 20% pool. It divides that pool between two previous years.
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Therefore, the balance is not a new percentage or a second 20% deduction. It is the unclaimed half of the original 20% additional-depreciation amount.
The calculation formula
Step 1: Identify eligible actual cost
Start with the actual cost that qualifies for additional depreciation after applying the applicable section 32 rules. Do not begin with the asset’s book carrying amount, written-down value or a number that includes costs that are not part of eligible actual cost under the applicable law.
Step 2: Calculate the full additional-depreciation pool
Use:
Full additional-depreciation pool = eligible actual cost × 20%
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Step 3: Calculate the first-year claim
For business use of fewer than 180 days in the acquisition and installation year:
First-year additional depreciation = eligible actual cost × 20% × 50%
That simplifies to:
First-year additional depreciation = eligible actual cost × 10%
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Step 4: Calculate the balance
The balance allowed in the immediately succeeding previous year is calculated in the same way:
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Balance additional depreciation = eligible actual cost × 20% × 50%
It also simplifies to:
Balance additional depreciation = eligible actual cost × 10%
The two 10% amounts together equal the full 20% pool. The 50% restriction applies because use was below 180 days, not because the machinery receives a permanently lower rate.
Worked calculation with ₹10,00,000 machinery
Assume the machinery is new, otherwise eligible, and has an eligible actual cost of ₹10,00,000. It is acquired, installed and first used in the business for fewer than 180 days in that previous year.
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| Calculation stage | Formula | Amount |
|---|---|---|
| Full additional-depreciation pool | ₹10,00,000 × 20% | ₹2,00,000 |
| Allowed in year first put to use | ₹2,00,000 × 50% | ₹1,00,000 |
| Balance in immediately succeeding previous year | ₹2,00,000 × 50% | ₹1,00,000 |
| Total additional depreciation over both years | ₹1,00,000 + ₹1,00,000 | ₹2,00,000 |
The ₹1,00,000 claimed in the second year is the balance additional depreciation. It is not calculated using the second year’s written-down value or a fresh acquisition cost.
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More arithmetic examples
The following examples use the same statutory percentages and are arithmetic illustrations. They show how the result changes with eligible actual cost; they do not represent government statistics.
| Eligible actual cost | Full pool at 20% | First-year claim at 50% of pool | Balance next year at 50% of pool |
|---|---|---|---|
| ₹5,00,000 | ₹1,00,000 | ₹50,000 | ₹50,000 |
| ₹7,50,000 | ₹1,50,000 | ₹75,000 | ₹75,000 |
| ₹12,50,000 | ₹2,50,000 | ₹1,25,000 | ₹1,25,000 |
| ₹25,00,000 | ₹5,00,000 | ₹2,50,000 | ₹2,50,000 |
For every qualifying cost in this table, the two staged claims add back to 20% of the original eligible cost. The timing changes; the statutory pool does not.
When the two-stage rule applies
Fewer than 180 days
The split applies when the plant or machinery is put to business use for fewer than 180 days in the year of acquisition and installation. The first-year deduction is restricted to half of the calculated additional depreciation, and the unallowed half moves to the immediately succeeding previous year.
180 days or more
The special split described here is triggered by use for fewer than 180 days. If the asset is used for 180 days or more in that year, the fewer-than-180-days restriction does not apply to the additional-depreciation claim under the rule described in the official materials. The exact claim should still be checked against the assessment-year text applicable to the return.
What “immediately succeeding previous year” requires
The balance belongs in the previous year immediately after the year in which the asset was first acquired, installed and used for fewer than 180 days. It should not be postponed to an arbitrary later year merely because that is more convenient. Maintain a schedule that identifies the first year, the 50% claimed there, and the next year in which the remaining 50% is claimed.
Eligibility checks before doing the arithmetic
A perfect percentage calculation cannot create a deduction for an ineligible asset. Complete these checks before entering the amount in a depreciation schedule.
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- New asset: The machinery or plant must be new under the applicable section 32(1)(iia) conditions. Previously used machinery is among the exclusions identified in the official material.
- Qualifying business: The asset must be acquired and installed for an eligible manufacturing or production business, or for a qualifying business of generation, transmission or distribution of power, as applicable to the relevant statutory version.
- Business installation and use: Confirm that the asset was actually acquired, installed and put to business use. Keep evidence for each event rather than relying only on the invoice date.
- Excluded locations: The provisos include exclusions for installations in office premises or residential accommodation, subject to the precise statutory wording that applies to the assessment year.
- Excluded equipment: Office appliances and road transport vehicles are among the listed exclusions in the official material.
- Applicable law: Section 32(1)(iia) has changed over time. Verify the version applicable to the assessment year, including the rate, qualifying business and exclusions, before filing.
If any eligibility condition fails, do not apply the 20% formula simply because the asset is described as machinery in the accounts.
How to calculate it in a working depreciation schedule
- Open an asset-level record. Use a separate line for each machine or for a clearly identifiable group acquired under the same invoice and installed together.
- Record the qualifying cost. Enter the eligible actual cost used for the section 32(1)(iia) calculation and retain the supporting cost computation.
- Record acquisition and installation dates. The dates establish the year in which the additional-depreciation claim begins.
- Record the date first put to use. Note the operational evidence used to determine whether business use was fewer than 180 days.
- Calculate the full pool. Multiply eligible actual cost by 20% and show the result before applying the first-year restriction.
- Apply the first-year limit. If use was below 180 days, multiply the full pool by 50%. This is the amount claimed in the year first put to use.
- Create the next-year opening balance. Carry exactly the unallowed 50% into the immediately succeeding previous year for that same asset.
- Claim and close the balance. In the succeeding previous year, claim the carried amount and mark the additional-depreciation pool as fully used once both halves have been claimed.
- Reconcile to the return. Tie the schedule to the depreciation figures reported in the tax computation and preserve the working paper that shows the 20% pool and the two 50% portions.
Records that support both claims
The timing rule makes documentation important because the deduction is divided across two years. Keep records that allow a reviewer to follow the asset from purchase through the second claim.
- Supplier invoice and purchase documentation identifying the machine.
- Proof of payment or other records supporting the actual-cost computation.
- Installation report, commissioning certificate, production log or comparable evidence showing when installation was completed.
- Evidence of the date on which the machine was first put to business use.
- Business records showing the qualifying manufacturing, production or power-related activity.
- Asset register entry identifying the machine, location and responsible business unit.
- Depreciation schedule showing eligible cost, 20% pool, first-year 50% claim and succeeding-year balance.
- Working papers documenting why the asset is new and why listed exclusions do not apply.
- A copy of the relevant assessment-year section 32 text or a contemporaneous professional review supporting the interpretation used.
Keep the first-year and second-year schedules linked by a unique asset identifier. That prevents the carried balance from being mistaken for a new asset addition.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Common mistakes and how to correct them
Claiming the whole 20% in the short-use year
Using the full pool in the first year ignores the fewer-than-180-days restriction. Recalculate the first-year amount as 50% of the pool and place the remaining 50% in the immediately succeeding previous year.
Claiming only 10% and forgetting the balance
The first-year amount is normally 10% of eligible cost, but that is only half of the 20% pool. Add a next-year schedule line so the unallowed 10% is not lost.
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The balance is the unallowed half of the original additional-depreciation pool. Reapplying 20% or 10% to a later written-down value produces a different number and does not follow the staged method.
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Moving the balance beyond the next previous year
The official rule places the balance in the immediately succeeding previous year. A schedule that leaves it open for several years does not reflect that timing requirement.
Counting calendar days without confirming business use
The relevant question is whether the machinery was put to business use for fewer than 180 days in the acquisition year. Do not substitute an invoice date or installation date for evidence of actual business use.
Applying the formula to an excluded asset
Newness alone is not enough. Office appliances, road transport vehicles, installations in the listed office or residential settings, previously used machinery and assets outside the qualifying businesses may be excluded under the applicable provisos.
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Rates, qualifying activities and exclusions must be checked for the assessment year being filed. Preserve the version consulted and have unusual fact patterns reviewed before submission.
A compact decision path
Use this sequence when reviewing one machine:
- Is it plant or machinery that is new under the applicable law?
- Was it acquired and installed for a qualifying manufacturing, production or power-related business?
- Do the office-premises, residential-premises, office-appliance and road-transport exclusions avoid applying?
- What is the eligible actual cost?
- Was it put to business use for fewer than 180 days in the acquisition and installation year?
- If yes, calculate 20% of eligible cost, claim half in that first year and schedule the other half in the immediately succeeding previous year.
- If no, apply the rule for the applicable assessment year without using the short-use split.
This sequence separates eligibility from arithmetic. It also creates an audit trail for why a particular machine received a two-year claim.
Why the balance was introduced
The Central Board of Direct Taxes explained the change as a way “To remove the discrimination in the manner of allowing additional depreciation on plant or machinery used for less than 180 days and plant or machinery used for 180 days or more.” The explanation states that the balance 50% not allowed in the year of acquisition and installation is allowed in the immediately succeeding previous year.
The practical effect is equal treatment of the total 20% pool over two stages for short-use assets, rather than permanently denying the portion restricted in the first year. The explanation is from CBDT Circular No. 19/2015; the operative claim must still follow the statutory text applicable to the assessment year.
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Final calculation checklist
- Eligible actual cost is documented.
- The machine is new and used in a qualifying business.
- Listed exclusions have been tested.
- Acquisition, installation and first-use dates are recorded.
- Business use below 180 days is established for the first year.
- Full pool equals eligible actual cost multiplied by 20%.
- First-year claim equals half of that pool, normally 10% of eligible cost.
- Balance equals the other half, normally another 10% of eligible cost.
- The balance is scheduled in the immediately succeeding previous year.
- The same asset identifier and supporting documents appear in both years.
- The assessment-year version of section 32 has been checked before filing.
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