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Treatment of Capital subsidy for calculating taxable income

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Dy. GM
28 Points Posted on 17 December 2025

How to treat the capital subsidy received in subsequent years on cost of plant and machinery for the purpose of calculation of taxable income of a company

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On 17 December 2025 at 12:18 Report
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Master in Accounts & high court Advocate
9615 Points Posted on 17 December 2025
  1. Reduce the actual cost of the asset. The capital subsidy is deducted from the original cost of the plant & machinery to arrive at the written down value (DWV).
  2. Taxability : The subsidy itself is not taxable as income if it is specifically for acquiring a capital asset. 
  3. Depreciation calculation: Depreciation is computed on the reduced cost (original cost minus subsidy) of the asset. 
  4. Accounting treatment: In some jurisdictions, the subsidy may be treated as a deferred income and recognized over the useful life of the asset, but for tax purpose , the cot reduction method i commonly applied. 
21 Reply
On 17 December 2025 at 13:20


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