Depreciation is a significant deduction for businesses and professionals, allowing them to recover the cost of assets used in their business or profession. The Direct Tax Code (DTC) 2025 provides a comprehensive depreciation framework under Section 33, with detailed rates prescribed in Appendix I of the Income-tax Rules, 2026. This guide explains the depreciation schedule and key compliance requirements.
The Statutory Framework
Section 33 — Deduction for Depreciation
Section 33 of the DTC provides for deduction in respect of depreciation of:
- Tangible Assets: Buildings, machinery, plant or furniture
- Intangible Assets: Know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature (acquired on or after 1st April, 1998)
Method of Depreciation
Depreciation is calculated on the Written Down Value (WDV) method for block of assets, except for certain specified assets where depreciation is calculated on actual cost.
Depreciation Rates — Buildings
| Type of Building | Depreciation Rate |
|---|---|
| Buildings used mainly for residential purposes (except hotels and boarding houses) | 5% |
| Buildings other than those used mainly for residential purposes | 10% |
| Buildings for installing machinery and plant forming part of water supply project or water treatment system (infrastructure facility) | 40% |
| Purely temporary erections such as wooden structures | 40% |
Key Points on Building Depreciation
- Residential buildings used by employees are allowed depreciation at 5%
- Non-residential buildings used for business purposes are allowed depreciation at 10%
- Temporary structures such as wooden structures are allowed depreciation at 40%
Depreciation Rates — Furniture and Fittings
| Type of Asset | Depreciation Rate |
|---|---|
| Furniture and fittings (including electrical fittings) | 10% |
Key Points on Furniture Depreciation
- There is only one rate in case of furniture and fittings
- Electrical fittings are included in furniture and fittings
Depreciation Rates — Plant and Machinery
| Type of Asset | Depreciation Rate |
|---|---|
| General plant and machinery | 15% |
| Motor cars (used in business) | 15% |
| Motor buses, motor lorries, and motor taxis used in a business of running them on hire | 30% |
| Computers (including computer software) | 40% |
| Books (professional) | 40% |
| Ships | 20% |
| Aeroplanes - Aeroengines | 40% |
| Moulds used in rubber and plastic goods factories | 30% |
| Air pollution control equipment | 40% |
| Water pollution control equipment | 40% |
| Solid waste control equipment | 40% |
| Life saving medical equipment | 40% |
| Renewable energy devices | 40% |
| Energy saving devices | 40% |
Key Points on Plant and Machinery Depreciation
- Machinery or plant costing up to ₹5,000 is allowed depreciation at 100%
- Computers and software are allowed depreciation at 40%
- Motor vehicles used in business are allowed depreciation at 15%
- New commercial vehicles acquired between 1st January, 2009 and 1st October, 2009 are allowed depreciation at 40%
Additional Depreciation
Section 33(8) — Additional Depreciation
Under Section 33(8) of the DTC, additional depreciation is allowed for:
- New machinery or plant acquired and installed by an assessee engaged in the business of manufacture or production of any article or thing
- New machinery or plant acquired and installed by an assessee engaged in the business of generation, transmission or distribution of power
Rate of Additional Depreciation
- 20% of the actual cost of the new machinery or plant in the tax year when it is acquired and put to use
- 10% of the actual cost, if the new machinery or plant is acquired and put to use for less than 180 days in the relevant tax year
Conditions for Additional Depreciation
- The new machinery or plant must not have been used either within or outside India before its installation
- It must not be installed in any office premises or residential accommodation
- It must not be in the nature of any office appliances or road transport vehicle
- It must not be an asset on which the whole of the actual cost is allowed as a deduction
Depreciation for Intangible Assets
Rate
Intangible assets such as know-how, patents, copyrights, trademarks, licences, and franchises are allowed depreciation at 25%.
Conditions
- The intangible asset must be acquired on or after 1st April, 1998
- It must not be goodwill of a business or profession
- It must be owned wholly or partly by the assessee
- It must be used for the purposes of the business or profession
Special Rules
Partial Use
If any building, machinery, plant or furniture is partly used for the purposes of the business or profession, the deduction shall be restricted to the fair proportionate part thereof.
Less than 180 Days
If an asset is acquired during the tax year and put to use for less than 180 days, the deduction shall be restricted to 50% of the prescribed rate.
Succession, Amalgamation, and Demerger
In cases of succession, amalgamation, or demerger, the aggregate depreciation allowable to the predecessor and successor shall not exceed the deduction calculated at the prescribed rates as if the succession, amalgamation, or demerger had not taken place.
Practical Compliance
For Businesses
Businesses must:
- Identify the block of assets
- Apply the correct depreciation rate
- Calculate depreciation on WDV
- Claim depreciation in the tax return
- Maintain proper records
For Professionals
Professionals must:
- Identify assets used in the profession
- Apply the correct depreciation rate
- Calculate depreciation on WDV
- Claim depreciation in the tax return
- Maintain proper records
Expert Legal Guidance
Anuj Desai & Associates provides comprehensive legal advisory services on depreciation compliance. Our direct tax experts help businesses and professionals understand depreciation rates, calculate depreciation correctly, and navigate the regulatory framework. We assist in depreciation computation, compliance reviews, and representation before income-tax authorities.
Disclaimer: This article provides general information and does not constitute legal advice. For specific guidance on depreciation or any other direct tax matter, please consult qualified legal professionals.
Need Expert Legal Guidance?
Navigating the depreciation framework requires experienced legal counsel. At Anuj Desai & Associates, we provide comprehensive direct tax advisory services, including:
- Depreciation Computation: Assistance with accurate depreciation calculation
- Compliance Advisory: Guidance on ongoing compliance requirements
- Tax Planning: Strategic tax planning for asset acquisitions
- Representation: Representation before income-tax authorities
Contact us for expert legal guidance on your depreciation matters.