CAF-2 · Chapter 8 · Question 5 of 15
A manufacturing company purchased and installed a new machine for Rs. 1,000,000 during the tax year. Assuming the normal depreciation rate is 15%, what is the total deduction (Initial Allowance + Normal Depreciation) allowed in the first year?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) C) Rs. 362,500
Explanation
Initial allowance = 25% of 1,000,000 = Rs. 250,000. The WDV for normal depreciation is the cost minus initial allowance (1,000,000 - 250,000 = 750,000). Normal depreciation = 15% of 750,000 = Rs. 112,500. Total deduction = 250,000 + 112,500 = Rs. 362,500.
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