Section 33 of the Income-tax Act, 2025 allows depreciation on tangible and intangible assets at prescribed rates on written down value. The deduction is restricted to 50% of the rate where an asset is acquired and put to use for less than 180 days, and 20% additional depreciation is available to manufacturers.
What section 33 does
Section 33 is the depreciation provision — the successor to sections 32 and 38 of the Income-tax Act, 1961, merged into a single section. It is one of the most-used provisions in any business computation, and one where the section number trips people up: depreciation is section 33, not section 32. Section 32 of the new Act is 'Other deductions'.
The structure is familiar. Depreciation runs on the block of assets at a percentage of written down value prescribed by rules, with a separate actual-cost basis for power generation and distribution undertakings under sub-section (2).
Goodwill is expressly outside the definition. Sub-section (1)(b) covers intangibles acquired on or after 1 April 1998 but says not being goodwill of a business or profession, and sub-section (12)(a)(ii) repeats the exclusion.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 32(1) | Depreciation on tangible and intangible assets | 33(1) |
| 32(1)(i) | Actual cost basis for power undertakings | 33(2) |
| 32(1)(ii) | Block of assets, written down value basis | 33(3)(a) |
| 38(2) | Proportionate restriction for partly used assets | 33(3)(b) |
| 32(1), second proviso | 50% of the rate where used under 180 days | 33(4) |
| 32(1)(iia) | Additional depreciation at 20% | 33(8) and 33(9) |
| 32(1)(iii) | Terminal depreciation for power undertakings | 33(10) |
| 32(2) | Carry forward of unabsorbed depreciation | 33(11) |
Section 33 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
Sub-section (1) — what qualifies, and what does not
Depreciation is allowed on tangible assets — buildings, machinery, plant or furniture — and on intangible assets being know-how, patents, copyrights, trademarks, licences, franchises or similar business or commercial rights acquired on or after 1 April 1998. The asset must be owned wholly or partly by the assessee and used wholly and exclusively for the business or profession. Goodwill is excluded.
Sub-section (2) — power undertakings
For an undertaking engaged in generation, or generation and distribution, of power, depreciation is a prescribed percentage of the actual cost, not of written down value. This is the straight-line option and it is what makes sub-section (10) terminal depreciation relevant for these businesses.
Sub-section (3) — block of assets, part use, and the section 54 bar
Clause (a) sets the general rule: a prescribed percentage of the written down value of the block. Clause (b) restricts the deduction to a fair proportionate part, as determined by the Assessing Officer, where an asset is partly or not wholly and exclusively used for business. Clause (c) bars depreciation where the actual cost of machinery or plant has already been allowed under section 54 (prospecting for mineral oils).
Sub-section (4) — the 180-day rule
The deduction is restricted to 50% of the prescribed rate where the asset is both acquired during the tax year and put to use for less than 180 days in that year. Both conditions must be met — an asset bought in an earlier year but used briefly this year is not affected.
Sub-section (5) — succession, amalgamation and demerger
In a succession under section 70(1)(zd), (ze) or (zf) or section 313, or in an amalgamation or demerger, the aggregate depreciation allowed to both parties cannot exceed what would have been allowed had the event not happened. It is apportioned on a pro rata basis by the number of days each party used the assets.
Sub-section (6) — improvements to a leased building
Where the assessee holds a building on lease or another right of occupancy and incurs capital expenditure on construction, renovation, extension or improvement, that structure or work is treated as a building owned by the assessee for this section. Leasehold improvements are therefore depreciable even though the building is not owned.
Sub-section (7) — depreciation is not optional
The section applies whether or not the assessee has claimed the deduction. You cannot preserve written down value for a later year by choosing not to claim depreciation.
Sub-sections (8) and (9) — additional depreciation
Additional depreciation is available to an assessee engaged in the manufacture or production of any article or thing, or in the generation, transmission or distribution of power, on new machinery or plant acquired, installed and first put to use by them. The asset must not have been used before, must not be installed in office premises or residential accommodation including a guest house, must not be an office appliance or road transport vehicle, and must not be one whose whole actual cost is otherwise deductible. The rate is 20% of actual cost, reduced to 10% where the asset is put to use for less than 180 days — with the remaining 10% allowed in the immediately succeeding tax year.
Sub-section (10) — terminal depreciation
For assets on which depreciation was claimed under sub-section (2) — that is, power undertakings on the actual cost basis — the difference between written down value and the moneys payable including scrap value is allowed as a deduction when the asset is sold, discarded, demolished or destroyed, provided it is not the year the asset was first put to use, the realisation is less than written down value, and the deficiency is actually written off in the books.
Sub-section (11) — unabsorbed depreciation
Where profits before depreciation are less than the allowable depreciation, the deduction is limited to the available profits; if there is a loss, no depreciation is allowed that year. The unallowed amount is added to the allowable depreciation of the succeeding tax year, and so on. This is subject to sections 112(3) and 113(4).
Sub-section (12) — the definitions
This defines assets (tangible and intangible, expressly excluding goodwill), know-how, and sold (which includes exchange and compulsory acquisition but excludes transfers in a scheme of amalgamation to an Indian amalgamated company, and certain banking amalgamations under the Banking Regulation Act, 1949). Written down value of the block takes its meaning from section 41(1)(c).
Worked example
A manufacturing company buys two machines in tax year 2026-27. Assume the prescribed rate for the block is 15%.
| Machine A | Machine B | |
|---|---|---|
| Actual cost | ₹80,00,000 | ₹50,00,000 |
| Date put to use | 10 May 2026 | 5 January 2027 |
| Days used in the year | More than 180 | Less than 180 |
| Normal depreciation under section 33(3)/(4) | 15% × ₹80,00,000 = ₹12,00,000 | 50% of 15% = 7.5% × ₹50,00,000 = ₹3,75,000 |
| Additional depreciation under section 33(9) | 20% × ₹80,00,000 = ₹16,00,000 | 10% × ₹50,00,000 = ₹5,00,000 |
| Balance additional depreciation in 2027-28 | — | ₹5,00,000 (the remaining 10%) |
Total depreciation in 2026-27 is ₹36,75,000, and a further ₹5,00,000 of additional depreciation on Machine B falls into 2027-28 under sub-section (9)(b). If the company had instead bought office furniture or a delivery van, additional depreciation would not be available at all — sub-section (8)(d) excludes office appliances and road transport vehicles.
Compliance checklist and due dates
- Record the date each asset was put to use, not just the invoice date — the 180-day test in sub-section (4) runs on use.
- Test additional depreciation against every condition in sub-section (8): new asset, not previously used, not in office or residential premises, not an office appliance or road transport vehicle.
- Carry forward the balance 10% additional depreciation to the next year where the asset was used for under 180 days.
- Do not capitalise goodwill into a depreciable block — sub-sections (1)(b) and (12)(a)(ii) exclude it.
- Claim depreciation even in a loss year; sub-section (7) applies the section whether or not it is claimed, and sub-section (11) governs the carry forward.
- For leasehold improvements, maintain a separate schedule — sub-section (6) treats them as a building you own.
- On amalgamation or demerger, apportion depreciation on a day count basis under sub-section (5).
Common mistakes
- Citing section 32 for depreciation. In the Income-tax Act, 2025 depreciation is section 33; section 32 is 'Other deductions'.
- Applying the 50% rule to an asset acquired in an earlier year. Sub-section (4) needs acquisition and under-180-day use in the same year.
- Claiming additional depreciation on a road transport vehicle or on plant installed in a guest house.
- Forgetting the balance 10% additional depreciation in the following year.
- Skipping depreciation to preserve written down value — sub-section (7) does not permit it.
- Claiming terminal depreciation under sub-section (10) without actually writing off the deficiency in the books.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.