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New Higher Rate of Depreciation on Motor Car

new-higher-rate-of-depreciation-on-motor-car

CBDT has issued a Notification No. 69/2019 dated 20.09.2019 and amended the rate of Depreciation on Motore Cars and other Motor Vehicles under the Income Tax Rules, 1962.

The rate of depreciation on motor cars and other motor vehicles has been amended and allowed a higher rate of depreciation for motor cars from 15 percent to 30 percent. In the case of Motor buses, motor lorries and motor taxis used in a business of running them on hire, the rate of depreciation increased from 30 percent to 45 percent.

Check the Chart of Depreciation Rates for Income Tax for AY 2020-21

The following are the key features of the notification-
  1. The notification was issued on 20th September 2019 but it has come into effect from 23rd August 2019 and not from 01st April 2019 itself.
  2. In order to eligible for claiming a higher rate of depreciation, motor cars or motor vehicles must be acquired between 23.08.2019 and 31.03.2020.
  3. Only acquisition is not sufficient, it must be 'put to use' on or before 31.03.2020.
  4. Higher rate of depreciation is also applicable for second-hand or previously used motor cars or motor vehicles.
  5. In case the assessee has any other block of assets under 'Machinery and Plant' which is eligible for 30 percent of depreciation then the new motor car shall form part of the block of assets of that block. There is no existing rate of depreciation of 45 percent, hence any motor vehicle purchased eligible for a 45 percent rate of depreciation shall form a new block of assets in 'Machinery and Plant'.
  6. This is a one-time benefit of higher depreciation. In other words, if the asset is acquired and put to use within the specified period (from 23.08.2019 to 31.03.2020) then only the higher rate of depreciation shall be available for AY 2020-21 and all the subsequent assessment years. This benefit shall expire from 01.04.2020. Normal rates of depreciation shall apply in those cases.
  7. If the asset is put to use for less than 180 days then the eligible higher rate of depreciation shall be reduced to half.
.For eg., if a motor car is purchased and put to use on 15.10.2019, the rate of depreciation shall be 15 percent ( half of the full rate of 30 percent), since the car is put to use for less than 180 days in the FY 2019-20.
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 20th September, 2019

(Income-tax)

G.S.R. 679 (E).In exercise of the powers conferred by section 32 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes, hereby, makes the following rules to further amend the Income-tax Rules, 1962, namely:-

1. Short title and commencement.- (1) These rules may be called the Income-tax (9th Amendment) Rules, 2019.

(2) They shall be deemed to have come into force with effect from the 23rd day of August, 2019.

2. In the Income-tax Rules, 1962, in the NEW APPENDIX I, in the Table, in PART A relating to TANGIBLE ASSETS, in item III relating to MACHINERY AND PLANT, –

(a) for sub-item (2) and entries relating thereto, the following shall be substituted, namely:-

Block of Assets
Depreciation allowed as per percentage of written down value
1
2
“(2) (i) Motor cars, other than those used in a business of running them on hire, acquired or put to use on or after the 1st day of April, 1990 except those covered under entry (ii);

15
(ii) Motor cars, other than those used in a business of running them on hire, acquired on or after the 23rd day of August, 2019 but before the 1st day of April, 2020 and is put to use before the 1st day of April, 2020.
30”;

(b) in sub-item (3), for paragraph (ii) and entries relating thereto, the following shall be substituted, namely:-

Block of Assets
Depreciation allowed as per percentage of written down value
1
2
“(ii) (a) Motor buses, motor lorries and motor taxis used in a business of running them on hire other than those covered under entry (b).

30
(b) Motor buses, motor lorries and motor taxis used in a business of running them on hire, acquired on or after the 23rd day of August, 2019 but before the 1st day of April, 2020 and is put to use before the 1st day of April, 2020.
45”.


[Notification No. 69 /2019/ F.No. 370142/17/2019-TPL]

SAURABH GUPTA, Under Secy. (Tax Policy & Legislation Division)

Explanatory Memorandum: It is certified that no person is being adversely affected by giving retrospective effect to this notification.

Note : The principal rules were published in the Gazette of India vide notification number S.O. 969(E), dated the 26th March, 1962 and last amended vide notification number G.S.R. 662(E) dated the 17th September, 2019.

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