Depreciation Rates May Be Reduced To 90-80%

The revenue department is likely to reduce the depreciation rates marginally to 90-80 per cent in case of several plants and machinery, at present carrying a 100 per cent rate. The draft depreciation schedule, posted on the Central Board of Direct Taxes website, had proposed that the rates be dropped across the board to 60 per cent.

According to revenue department officials, for non-perishables, the rate would be reduced to 90 per cent or even 80 per cent in some cases. These could include rollers, burners and electrical equipment. However, in case of cinematograph films like bulbs of studio lights, the rate would be maintained at 100 per cent.

The rates, which would be applicable for the assessment year 2003-04, are likely to be notified shortly. The items in the list that are allowed 100 per cent depreciation include air and water pollution control equipment, specialised boilers and furnaces, waste heat recovery equipment, co-generation systems, burners, rollers, renewal energy devices and match factories.

Officials said the original proposal to cut the rates to 60 per cent was intended to check tax evasion by several companies, which took advantage of the higher rates and reported less income. However, to sustain the feel-good factor in the economy, it has been decided not to make a steep cut across the board. Revenue department sources said the new rates, which are to be inserted in the income-tax rules, have already been cleared by the law ministry.