CBDT extends depreciation benefit on CVs

Move to boost demand for domestic truck makers.

In a move that will boost demand for domestic truck makers, the government today extended higher depreciation benefits by another six months till September this year.

According to a notification issued by the Central Board of Direct Taxes (CBDT), which administers matters relating to direct tax in India, truck owners can claim 50 per cent depreciation for vehicles that are bought and put to use before October 1, 2009.

Both truck companies and operators were demanding the government to extend the scheme from April 1, 2009, because of continued contraction in demand for trucks and buses. For truck operators, a higher depreciation would increase their net income after tax.

In March 2009, commercial vehicles sales dipped by 26 per cent to 41,881 units, according to the latest data provided by the Society of Indian Automobile Manufacturers (SIAM). For twelve months ended March 2009, domestic sales declined by 22 per cent to 3,84,122 units.

Enhanced depreciation was first introduced in January 2009 as part of the stimulus packages announced by the government to boost economic demand.

Earlier, the government had made this benefit available for commercial vehicles acquired on or after January 1, 2009 and put to use before April 1, 2009.

Three companies — Tata Motors Ltd, Ashok Leyland Ltd and Mahindra & Mahindra Ltd — dominate the domestic commercial vehicles with combined market share of more than 80 per cent.

Besides higher depreciation, the government has also released funds to state transport undertakings through the Jawaharlal Nehru Memorial Urban Renewal Mission (JNNURM) to replace ageing buses.