Depreciation Rates for FY 2025-26
Depreciation is a deduction permitted under the Income Tax Act, accounting for the decrease in the actual value of a tangible or intangible asset used by a taxpayer.
Table of Contents
It is mandatory to calculate depreciation on assets used or acquired for business or professional purposes, as per the Income Tax Act of 1962, which specifies varying depreciation rates for different asset categories.
What is Depreciation?
Depreciation refers to the allocation of an asset's cost over its useful life. It is a mandatory deduction recorded in the profit and loss statements of an entity using depreciable assets.
The Income Tax Act permits depreciation to be calculated either through the Straight-line method or the Written Down Value (WDV) method. While the WDV method is commonly applied, entities engaged in power generation or both generation and distribution have the option to use the Straight-line method. Additionally, under certain conditions, the Act provides for an extra deduction of depreciation in the year of asset purchase.
Formula for Depreciation Calculation
- Straight-line Method Rate of Depreciation (SLM)= (Original Cost−Residual Value/Useful Life) × 100
- Depreciation Amount= Original Cost × Rate of Depreciation (SLM)
Depreciation Rates for FY 2024-25
The Income Tax Act 1962, has made it mandatory to calculate depreciation. Following are the depreciation rates for different classes of assets.
Sl. No. | Asset Class | Asset Type | Rate of Depreciation |
1 | Building | Residential buildings not including boarding houses and hotels | 5% |
2 | Building | Boarding houses and hotels | 10% |
3 | Building | Purely temporary constructions like wooden structures | 40% |
4 | Furniture | Any fittings / furniture including electrical fittings | 10% |
5 | Plant and machinery | Motor cars excluding those used in a business of running them on hire | 15% |
6 | Plant and machinery | Motor cars excluding those used in a business of running them on hire purchased on or after 23 August 2019 but before the 1 April 2020 and is put to use before 1 April 2020. | 30% |
7 | Plant and machinery | Lorries/taxis/motor buses used in a business of running them on hire | 30% |
8 | Plant and machinery | Lorries/taxis/motor buses used in a business of running them on hire purchased on or after 23 August 2019 but before the 1 April 2020 and is put to use before 1 April 2020 | 45% |
9 | Plant and machinery | Computers and computer software | 40% |
10 | Plant and machinery | Books owned by assessee carrying on a profession being annual publications | 100% |
11 | Plant and machinery | Books owned by assessee carrying on profession not being annual publications | 60% |
12 | Plant and machinery | Books owned by assessee carrying on business in running lending libraries | 100% |
13 | Intangible assets | Franchise, trademark, patents, license, copyright, know-how or other commercial or business rights of similar nature | 25% |
Depreciation Rates as per the Income Tax Act
Asset Class | Sr. No. | Asset Type | Rate of Depreciation |
Part A Tangible Assets | |||
Building | 1 | Buildings used primarily for residential reasons (excluding boarding houses and hotels) | 5% |
2 | Buildings apart from those used primarily for residential reasons and not covered by subitems 1 (above) and 3 (below) | 10% | |
3 | Buildings procured on or after 1 September 2002, for installing plant and machinery forming part of water treatment system or water supply project and which is used for the purpose of business of providing infrastructure facilities under clause (i) of subsection (4) of section 80-IA | 40% | |
4 | Purely temporary erections like wooden structures | 40% | |
Furniture and fittings |
| Furniture and fittings including electrical fittings | 10% |
Plant and machinery | 1 | Plant and machinery excluding those covered by sub-items (2), (3) and (8) below | 15% |
| 2 | Motor cars, excluding those used in a business of running them on hire, procured or put to use on or after 1 April 1990 | 15% |
| 3 | Motor cars, other than those used in a business of running them on hire, acquired on or after the 23 August 2019 but before the 1 April 2020 and is put to use before the 1 April 2020. | 30% |
| 3(i) | Aeroplanes, Aero Engines | 40% |
| 3(ii) | (a) Motor taxis, motor buses and motor lorries used in a business of running them on hire | 30% |
(b) Motor buses, motor lorries and motor taxis used in a business of running them on hire, acquired on or after the 23 August 2019 but before the 1 April 2020 and is put to use before the 1 April 2020. | 45% | ||
3(iii) | Commercial vehicle which is procured by the assessee on or after 1 October 1998, but before 1 April 1999, and is used for any period of time prior to 1 April 1999, for the purpose of profession or business in agreement with the third proviso to clause (ii) of sub-section (1) of section 32 | 40% | |
| 3(iv) | New commercial vehicle procured on or after 1 October 1998, but prior to 1 April 1999, in replacement of condemned vehicle of more than 15 years of age and is used for any period of time prior to 1 April 1999, for the purpose of business or profession in agreement with the third proviso to clause (ii) of sub-section (1) of section 32. | 40% |
3(v) | New commercial vehicle procured on or after 1 April 1999, but before 1 April 2000, in replacement of condemned vehicle of more than 15 years of age and is put to use prior to 1 April 2000, for the purposes of profession or business in agreement with the second proviso to clause (ii) of sub-section (1) of section 32 | 40% | |
3(vi) | New commercial vehicle procured on or after 1 April 2001, but before 1 April 2002, and is put to use before 1 April 2002, for the purpose of profession or business | 40% | |
New commercial vehicle which is acquired on or after the 1 January 2009 but before the 1 October 2009 and is put to use before the 1 October 2009 for the purposes of business or profession | 40% | ||
3(vii) | Moulds used in plastic and rubber goods factories | 30% | |
3(viii) | Air pollution control equipment | 40% | |
Felt-filer system |
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Electrostatic precipitation systems |
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Scrubber |
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Counter current / packed bed / venture / cyclonic scrubbers |
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Dust collector systems |
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Evacuation system and ash handling system |
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3(ix) | Water pollution control equipment | 40% | |
Aerated detritus chambers (including air compressor) |
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Mechanical screen systems |
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Mechanically skimmed grease and oil removal systems |
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Flash mixing equipment and chemical feed systems |
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Mechanical reactors and mechanical flocculators |
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Mechanically aerated activated sludge / diffused air systems |
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Biofilters |
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Aerated lagoon systems |
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Air floatation systems |
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Methane |
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recovery anaerobic digester systems |
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Steam/air stripping systems |
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Marine outfall systems |
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Urea Hydrolysis systems |
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Activated carbon column |
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Bio |
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Disc or rotating biological contractor |
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Marine outfall systems |
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Ion exchange resin column |
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Centrifuge for dewatering sludge |
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3(x) | (a) Solid waste, control equipment Cryolite / mineral / lime / caustic / chrome recovery system (b) Resource recovery and solid waste recycling systems | 40% | |
3(xi) | Plant and machinery used in semiconductor industry covering all integrated circuits (ICs) (not including hybrid integrated circuits) ranging from small scale integration (SSI) to large scale integration / very large scale integration (LSI/VLSI) as also discrete semiconductor devices like diodes, triacs, thyristors, transistors, etc., except those covered by entries (viii), (ix), (x) of this sub-item and sub-item (8) below | 30% | |
3(xi)a | Life Saving medical equipment | 40% | |
D.C Defibrillators for pacemakers and internal use |
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Colour Doppler |
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Haemodialysis |
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Cobalt therapy unit |
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Vascular Angiography System including Digital subtraction Angiography |
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Heart lung machine |
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Spect Gamma Camera |
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Magnetic Resonance Imaging System |
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Ventilator used with anaesthesia apparatus |
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Ventilator except those used with anaesthesia |
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Surgical laser |
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Gamma knife |
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Fibre optic endoscopes including audit resectoscope or paediatric resectoscope, arthoscope, peritoneoscopes, fibreoptic flexible nasal pharyngo, microaryngoscope, video laryngo, fiberoptic flexible laryngo bronchoscope. |
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Bronchoscope, video oescophago gastroscope, video oescopghago bronchoscope, fibreoptic flexible oesophago gastroscope |
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| 4 | Containers made of plastic or glass used as refills | 40% |
| 5 | Computers including computer software | 40% |
| 6 | Plant and machinery, used in processing, weaving and garment sector of textile industry, which is bought under TUFS on or after 1 April 2001, but prior to 1 April 2004, and is put to use prior to 1 April 2004 | 40% |
| 7 | Plant and machinery procured and installed on or after 1 September 2002, in a water treatment system or a water supply project and put to use for the purpose of business of providing infrastructure facility under clause (i) of sub-section (4) of section 80-IA | 40% |
| 8 | 1. Wooden parts used in artificial silk manufacturing machinery | 40% |
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| 2. Match factories, wooden match frames | 40% |
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| 3. Cinematograph films, bulbs of studio lights | 40% |
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| 4. Salt works, condensers, reservoirs, salt pans, etc., made of clayey, sandy or earthy material or any other similar material | 40% |
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| 5. Quarries and mines |
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| Sand stowing pipes, winding ropes, tubs and haulage ropes | 40% |
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| Safety lamps | 40% |
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| 6. Flour mills, rollers | 40% |
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| 7. Sugar works, rollers | 40% |
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| 8. Steel and iron industry, rolling mill rolls | 40% |
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| 9. Energy saving devices |
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| (A) Furnaces and specialised boilers |
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| (i) Fluidised bed boilers / ignifluid |
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| (ii) Continuous pusher type furnaces and flameless furnaces |
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| (iii) High efficiency boilers |
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| (iv) Fluidised bed type heat treatment | 40% |
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| (B) Instrumentation and monitoring system for monitoring energy flows |
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| (i) Digital heat loss meters |
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| (ii) Automatic electrical load monitoring systems |
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| (iii) Infrared thermography | 40% |
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| (iv) Microprocessor based control systems |
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| (v) Meters for measuring heat losses, steam flow, furnace oil flow, power factor and electric energy meters |
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| (vi) Exhaust gas analysers |
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| (vii) Maximum demand indicator and clamp on power meters |
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| (viii) Fuel oil pump test bench |
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| (C) Waste heat recovery equipment |
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| (i) Air pre-heaters and recuperators | 40% |
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| (ii) Feed water heaters and economisers |
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| (iii) Thermal energy wheel for low and high temperature heat recovery |
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| (iv) Heat pumps |
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| (D) Co-generation systems |
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| (i) Controlled extraction, back pressure pass out, extraction cum condensing turbines for cogeneration along with pressure boilers | 40% |
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| (ii) Organic rankine cycle power systems |
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| (iii) Vapour absorption refrigeration systems |
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| (iv) Low inlet pressure small steam turbines |
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| (E) Electrical equipment |
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| (i) Synchronous condenser systems and shunt capacitors |
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| (ii) Relays (automatic power cut off devices) |
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| (iii) Power factor controller for AC motors |
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| (iv) Automatic voltage controller |
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| (v) Solid state devices for controlling motor speeds |
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| (vi) FACT (Flexible AC Transmission) devices, Thyristor controlled series compensation equipment | 40% |
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| (vii) Thermally energy-efficient stenters |
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| (viii) Series compensation equipment |
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| (ix) TOD (Time of Day) energy meters |
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| (x) Intelligent electronic devices/remote terminal units, computer software/hardware, bridges/router, other required equipment and associated communication systems for data acquisition systems and supervisory control, distribution management systems and energy management systems for power transmission systems |
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| (xi) Special energy meters for ABT (Availability Based Tariff) |
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| (F) Burners |
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| (i) Zero to ten per cent excess air burners |
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| (ii) Burners using air with high preheat temperature (above 300 degrees Celsius) |
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| (iii) Emulsion burners | 40% |
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| (G) Other equipment |
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| (i) Mechanical vapour recompressors |
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| (ii) Wet air oxidation equipment for recovery of heat and chemicals |
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| (iii) Automatic microprocessor based load demand controllers | 40% |
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| (iv) Thin film evaporators |
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| (v) Fluid couplings and fluid drives |
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| (vi) Coal based producer gas plants |
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| (vii) Super-charges/turbo charges |
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| (viii) Sealed radiation sources for radiation processing plants |
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| 10. Gas cylinders including regulators and valves | 40% |
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| 11. Glass manufacturing concerns, Direct fire glass melting furnaces | 40% |
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| 12. Mineral oil concerns | 40% |
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| (i) Plant used in field operations (above ground) distribution, returnable packages |
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| (ii) Plant used in field operations (below ground), but not including kerbside pumps including fittings and tanks used in field operations (distribution) by mineral oil concerns |
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| (iii) Oil wells not covered in (i) and (ii) above | 15% |
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| 13. Renewable energy devices |
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| (i) Pipe type and concentrating solar collectors |
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| (ii) Flat plate solar collectors |
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| (iii) Solar cookers |
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| (iv) Air/fluid/gas heating systems |
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| (v) Solar water heaters and systems |
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| (vi) Solar crop drivers and systems |
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| (vii) Solar steels and desalination systems |
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| (viii) Solar refrigeration, air conditioning systems and cold storages |
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| (ix) Solar pumps based on solar-photovoltaic and solar-thermal conversion | 40% |
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| (x) Solar power generating systems |
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| (xi) Solar-photovoltaic panels and modules for water pumping and other applications |
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| 14. Windmills and any other specially designed devices that operate on windmills (installed on or after 1 April 2014) |
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| 15. Any special devices including electric pumps and generators operating on wind energy (installed on or after 1 April 2014) |
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| 16. Books owned by assessees carrying on a profession |
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| (i) Books, being annual publications | 40% |
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| (ii) Books, excluding those covered by entry (i) above | 40% |
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| (iii) Books owned by assessees carrying on business in running lending libraries | 40% |
Ships | 4(i) | Ocean-going ships including tugs, survey launches, dredgers, barges and other similar ships used primarily for dredging purposes and sighing vessels with wooden hull | 20% |
| 4(ii) | Vessels ordinarily operating on inland waters, not covered by sub-item (iii) below | 20% |
| 4 (iii) | Vessels ordinarily operating on inland waters being speed boats | 20% |
Part B Intangible Assets | |||
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| Franchise, trademark, patents, license, copyright, know-how or other commercial or business rights of similar nature | 25% |
Concept of Blocking of Assets
Depreciation is calculated on the Written Down Value (WDV) of a block of assets. A block of assets is a group of assets categorised within a class, which includes:
- Tangible Assets: Tangible assets such as buildings, machinery, plants, or furniture.
- Intangible Assets: Intangible assets like know-how, patents, copyrights, trademarks, licenses, franchises, or other business or commercial rights of a similar nature.
The classification of a block of assets is based on factors such as the asset's nature, lifespan, and similar usage. The depreciation rate within each asset class is used to further classify the assets. Each class of assets with the same depreciation rate forms a block.
Under the Income Tax Act, individual assets lose their separate identity, as depreciation is calculated collectively on the block of assets rather than on individual items.
What is Written Down Value (WDV) of Assets?
According to Section 32(1) of the Income Tax Act, depreciation must be calculated at the prescribed rate on the Written Down Value (WDV) of the asset, which is determined based on the actual cost of the asset. To accurately compute depreciation, it is essential to understand the concepts of ‘WDV’ and ‘Actual Cost'.
Under the Income Tax Act:
- If the asset is acquired during the previous year, its actual cost is considered the WDV.
- If the asset was acquired in an earlier year, the WDV is the actual cost of the asset minus the depreciation already allowed under the Act.
Conditions for Claiming Depreciation
- The asset must be wholly or partially owned by the taxpayer.
- The asset must be used for the taxpayer's business or profession. If the asset is used for both business and personal purposes, depreciation will be proportionate to its business use. The Income Tax Officer can determine the appropriate depreciation under Section 38 of the Income Tax Act.
- Co-owners are eligible to claim depreciation based on the portion of the asset they own.
- Depreciation cannot be claimed on Goodwill or land.
- From Assessment Year 2002-03 onwards, claiming depreciation is mandatory and will be allowed or deemed allowed, regardless of whether the taxpayer claims it in the profit & loss account. The Written Down Value (WDV) will be reduced by the depreciation amount accordingly.
- If the presumptive taxation scheme is opted for, the deemed profit is considered to already reflect the impact of depreciation.
- Depreciation under the Income Tax Act follows specific rates, which differ from those under the Companies Act, 1956. Therefore, only the rates prescribed by the Income Tax Act are allowed, regardless of the rates used in the taxpayer’s books of accounts.
FAQs on Depreciation under the Income Tax Act
- What is depreciation under the Income Tax Act?
Depreciation is a deduction permitted under the Income Tax Act that accounts for the decrease in the actual value of a tangible or intangible asset used by a taxpayer.
- How is depreciation calculated under the Income Tax Act?
Depreciation can be calculated using either the Straight-line Method (SLM) or the Written Down Value (WDV) Method. The WDV method is commonly used, but entities involved in power generation and distribution can opt for the SLM method.
- What is the concept of 'Block of Assets'?
Depreciation is calculated on a "Block of Assets," which is a group of assets within a similar class, such as buildings, machinery, or intangible assets. The depreciation is applied to the entire block, not individual assets.
- Who is eligible to claim depreciation on assets?
Depreciation can be claimed by the owner or co-owners of the asset. If an asset is used for both business and personal purposes, depreciation will be proportional to the business use.
- What conditions must be met to claim depreciation?
The taxpayer must own the asset (wholly or partially) and use it for business or professional purposes. Depreciation cannot be claimed on goodwill or land. From Assessment Year 2002-03, claiming depreciation is mandatory.
- What is the difference between depreciation under the Income Tax Act and the Companies Act?
The primary difference is in the calculation method. The Income Tax Act uses either the WDV method or the SLM method for power generation companies, while the Companies Act provides different depreciation rates and methods.
- What is a Written Down Value (WDV)?
WDV refers to the actual cost of an asset minus the depreciation already allowed. For assets acquired in the previous year, the WDV equals the actual cost, while for older assets, it is the original cost, less the accumulated depreciation.
- Can depreciation be claimed on leased assets?
Yes, in finance lease transactions, the lessee is required to capitalise the asset in its books and can claim depreciation as the effective owner of the asset under Accounting Standard AS-19.
- What happens to depreciation in the case of amalgamation or demerger?
In the event of an amalgamation or demerger, the total depreciation allowance is apportioned between the companies involved based on the period the assets were used by each company.
- Can additional depreciation be claimed in the year of purchase?
Yes, under certain conditions, the Income Tax Act allows for an additional depreciation deduction in the year an asset is purchased. This helps in reducing the taxable income for that year.
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