Key Highlights
- Depreciation under Section 35, ITA 2025 — WDV method for most assets
- Assets grouped in blocks — depreciation on entire block, not individual assets
- Key rates: Buildings 10%; Plant and machinery 15%; Computers 40%; Intangibles 25%
- Additional depreciation: 20% on new P&M (manufacturing/power) — Section 36
- Actual Cost concept: includes purchase price, installation, duties, freight
- Part-year rule: 50% depreciation if asset used for less than 180 days in the year
- No depreciation on land — only on buildings
1. Block of Assets
Depreciation is computed on a "block" basis — all assets of the same class and same depreciation rate are grouped together. When a new asset is purchased, its cost is added to the block. When an asset is sold, its sale price is deducted from the block. Depreciation is applied to the WDV of the entire block at year end.
2. Depreciation Rates Under Schedule XIV
| Asset Category | Rate |
|---|---|
| Buildings (residential used for business) | 5% |
| Buildings (other commercial buildings) | 10% |
| Furniture and fittings | 10% |
| Plant and machinery (general) | 15% |
| Motor vehicles (personal use / business) | 15% |
| Computers, software, IT equipment | 40% |
| Intangible assets (patents, copyrights, trademarks, knowhow, licences) | 25% |
| Goodwill | 0% (no depreciation from AY 2022-23 onwards) |
3. Additional Depreciation: Section 36
Manufacturers and electricity generating companies get an additional 20% depreciation (over and above the normal depreciation) on new plant and machinery in the year of first use:
- Available only for manufacturing and power generation sectors
- New plant/machinery not previously used in India
- Not applicable to office equipment, vehicles, ships, aircraft, or assets used outside India
- If used for less than 180 days in first year: additional depreciation restricted to 10% (half of 20%) — carry forward remaining 10% to next year
4. Computation Example
Illustrative only. A manufacturing company has an existing P&M block of Rs 50 lakh WDV at 1 April 2026. It purchases new machinery for Rs 20 lakh on 10 June 2026 (used 300 days in Tax Year 2026-27).
- Opening WDV: Rs 50 lakh
- Add: New purchase: Rs 20 lakh
- WDV before depreciation: Rs 70 lakh
- Normal depreciation at 15%: Rs 10.5 lakh
- Additional depreciation at 20% on new Rs 20 lakh (used >180 days): Rs 4 lakh
- Total depreciation: Rs 14.5 lakh
- Closing WDV: Rs 55.5 lakh
5. Short Life Assets: 50% Rule
If an asset is purchased and put to use for less than 180 days in the Tax Year, only 50% of the normal depreciation rate applies for that year. The full rate applies in subsequent years. Additional depreciation is also restricted to 10% (half of 20%) for short-year assets — carry forward the remaining 10% to the next year.
6. Why TaxClue
Depreciation computation — block management, sale of assets, additional depreciation claims — requires careful tracking. TaxClue prepares depreciation schedules, identifies additional depreciation claims, and files ITR/audit reports accurately. Contact us for business tax and depreciation advisory under ITA 2025.