Bonus depreciation is a tax incentive that allows businesses to immediately deduct a large percentage — sometimes up to 100% — of the cost of eligible capital assets in the year of purchase, rather than depreciating the asset over its useful life under standard depreciation schedules. By front-loading the depreciation deduction, businesses reduce their taxable income significantly in the year of capital expenditure, conserving cash flow for reinvestment and stimulating capital investment activity. Bonus depreciation is primarily a US tax concept — the Tax Cuts and Jobs Act of 2017 introduced 100% first-year bonus depreciation for qualifying property. In India, while the term 'bonus depreciation' is not used explicitly, the concept is reflected through additional depreciation provisions under the Income Tax Act, 1961 — Section 32(1)(iia) allows manufacturing companies to claim an additional 20% depreciation on new plant and machinery in the year of acquisition, over and above the standard WDV depreciation rates. This additional depreciation incentive is designed to encourage capital investment in Indian manufacturing and production capacity, aligning with the government's Make in India and PLI (Production Linked Incentive) scheme objectives to boost domestic manufacturing.
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