Buying Machinery Before 31 March 2027: 15% Depreciation Plus 20% Additional, the 180-Day Rule, GST Credit and Capital Subsidy for Manufacturers

New machinery installed by a manufacturer before 31 March 2027 earns 15% depreciation plus 20% additional depreciation, if the rules are met.

Hiren and his brother run a partnership firm in Rajkot that makes submersible pump parts. They plan to buy a new CNC turning centre for Rs 50 lakh, a second-hand lathe for Rs 8 lakh and a car for the partners before March, and the CNC supplier has offered delivery in February. They want to know how much tax the purchases will save this year, and whether buying in February rather than earlier costs them anything.

The last five months of the financial year are when manufacturers in Rajkot, Morbi and Jamnagar plan their machinery purchases. Depreciation rules decide how much of that spending reduces this year's tax. Here is how they work in 2026-27.

Short Answer: A manufacturer that buys and installs new plant and machinery before 31 March 2027 can claim 15% normal depreciation and 20% additional depreciation on its cost. If the machine is used for less than 180 days in the year, both are halved, and the remaining 10% of additional depreciation is claimed next year. Additional depreciation is not available on second-hand machines, office equipment or vehicles, or to companies paying the concessional 22% or 15% rates and individuals under the new tax regime. GST paid on the machine is taken as input tax credit, not added to its cost, and a capital subsidy reduces the cost.

Our team plans capital purchases, depreciation and advance tax for manufacturers. Call or WhatsApp +91 82005 28355, or see the details at the end of this guide.

Normal depreciation

• Plant and machinery: 15% a year on the written-down value of the block.
• Computers and software: 40%.
• Cars: 15%, with no additional depreciation. See buying a car in your company's name.
• The 180-day rule: an asset put to use for less than 180 days in the year gets half the rate in that year.
• Put to use: the machine must be installed and ready for use by 31 March. Delivery alone is not enough.

Additional depreciation of 20%

• Who gets it: businesses manufacturing or producing goods, or generating power, on new plant and machinery.
• How much: 20% of the actual cost, on top of normal depreciation, in the year the machine is put to use.
• Bought late in the year: if used for less than 180 days, 10% is claimed this year and the other 10% next year, so nothing is lost.
• Not covered: second-hand machinery, office appliances, road transport vehicles, machines installed in offices or homes, and assets fully written off in one year.

Who cannot claim it

• Concessional company rates: companies paying tax at 22% or 15% under the concessional regimes give up additional depreciation.
• New regime individuals: proprietors under the new tax regime cannot claim it either.
• Firms and LLPs: taxed at the flat 30% rate, they can claim it.
• Compare first: for a proprietor planning large purchases, the old regime may work out cheaper for that year.

Cost, GST and subsidy

• GST: GST on machinery is claimed in full as input tax credit, so it is not part of the cost. You cannot claim both the credit and depreciation on the same GST.
• Loan interest: interest on a loan for the machine, up to the date it is first put to use, is added to its cost rather than claimed as an expense.
• Capital subsidy: a subsidy linked to the machine under a state or central scheme reduces its cost for depreciation. See MSME benefits and grants.
• Loans: banks finance machinery against a project report and quotations. See what banks want in a loan file.

An example

A new CNC machine costing Rs 50 lakh, put to use in February: normal depreciation of 7.5%, Rs 3.75 lakh, and additional depreciation of 10%, Rs 5 lakh, this year, with another Rs 5 lakh of additional depreciation next year. That is Rs 8.75 lakh off this year's profit, against Rs 3.75 lakh if additional depreciation did not apply. For a firm taxed at about 31%, the difference is roughly Rs 1.5 lakh of tax this year.

Plan it with advance tax

• Last instalment: the final advance tax instalment is due by 15 March, so estimate depreciation before paying it. See advance tax due dates.
• Keep proof: invoices, installation reports and the date of first use support the claim.

Back to Hiren. The new CNC machine, installed and running by the end of February, earns Rs 8.75 lakh of depreciation this year and another Rs 5 lakh of additional depreciation next year, because the firm is not bound by the new regime. The second-hand lathe gets only normal depreciation, at half the rate this year, and the car gets 15% with no additional claim. The GST on the CNC machine is taken as credit, interest before installation is added to its cost, and the firm's application for a state capital subsidy is filed, with the cost reduced when the subsidy arrives.

How we help

• Planning machinery purchases around depreciation and advance tax
• Choosing between tax regimes for proprietors
• Fixed asset registers and depreciation working
• GST credit on capital goods
• Capital subsidy applications and accounting
• Project reports for machinery loans

Gadhia Associate has been in practice since 2007 and has handled work for over 7,000 clients, with a 5.0 Google rating from more than 100 reviews. Manufacturers from Junagadh, Rajkot, Morbi, Jamnagar and Gondal come to our Junagadh office, where same-day appointments are available. Work for clients elsewhere is handled online.

Planning to buy machinery before March? Work out the tax saving before you place the order. Call or WhatsApp +91 82005 28355, or message us on WhatsApp. The first consultation is free.

Frequently asked questions

What is the depreciation rate on plant and machinery?

15% a year on the written-down value, with 40% for computers.

What is additional depreciation?

An extra 20% of the cost of new plant and machinery for manufacturers, in the year it is put to use.

What if a machine is bought in the last months of the year?

If used for less than 180 days, half of normal and additional depreciation is allowed, and the remaining half of additional depreciation is claimed next year.

Is additional depreciation available on second-hand machinery?

No. It applies only to new plant and machinery.

Can a company paying 22% tax claim additional depreciation?

No. Companies under the 22% and 15% regimes give it up.

Is GST on machinery added to its cost?

Not if you claim it as input tax credit, which is usually the better choice.

Position as of 1 November 2026, under the depreciation rules carried into the Income-tax Act, 2025. Rates and conditions depend on the asset and your tax regime, so take advice before you buy.