Investment allowance

Investment Allowance – Investment allowance is a tax incentive offered by governments to encourage businesses to invest in new plant, machinery, or capital assets. It allows companies to deduct a specified percentage of the cost of such investments from their taxable income, thereby reducing their overall tax liability. Key Points: Encourages modernization and expansion of businesses. Typically applies to new and specified types of assets. Reduces taxable income, which lowers the corporate tax burden. Promotes economic growth and job creation by stimulating capital expenditure. Example: A company invests ₹10 lakh in new machinery. If the investment allowance rate is 15%, the company can claim a deduction of ₹1.5 lakh from its taxable income, reducing its overall tax liability.