Section 32 allows depreciation on tangible and intangible assets used for business or profession, computed on the Written Down Value (WDV) method and the block-of-assets system (SLM only for power-generation undertakings). Key WDV rates: computers & software 40%, plant & machinery 15%, buildings 10% (5% residential), furniture 10%. New manufacturing plant & machinery gets an extra 20% additional depreciation. Assets put to use for less than 180 days in the year get half the rate. Depreciation applies under both the old and new tax regimes.
From AY 2026-27 the Income-tax Act, 2025 replaces the Income-tax Act, 1961; the depreciation provision earlier in Section 32 is carried forward with the same WDV method, block-of-assets system and rate schedule. "Section 32 depreciation" remains the everyday name. Confirm the exact rate for an asset against the Appendix I schedule on incometax.gov.in before filing.
Section 32 Depreciation Rates — Asset-Wise (WDV)
Rates below are the Written Down Value rates from the income-tax depreciation schedule (Appendix I). Every asset falls into a block; depreciation is charged on the whole block, not on individual items.
| Asset category | WDV rate | Notes |
|---|---|---|
| Residential buildings | 5% | Used as residential accommodation |
| Buildings (non-residential / factory) | 10% | Commercial & factory buildings used for business |
| Temporary wooden / bamboo structures | 100% | Fully written off in the year of purchase |
| Plant & machinery (general) | 15% | Most general plant and machinery |
| Computers & computer software | 40% | Includes laptops, tablets used for business |
| Motor cars (not for hire) | 15% | Business-use cars |
| Motor buses / lorries / taxis (on hire) | 30% | Used in a hire / transport business |
| Furniture & fittings | 10% | Office furniture and fixtures |
| Ships | 20% | Ocean-going and coastal vessels |
| Aircraft | 40% | Aeroplanes, helicopters |
| Intangibles (patents, copyrights, know-how, trademarks) | 25% | Acquired intangible assets only |
| Pollution-control / notified energy-saving equipment | 40%–100% | Depends on the specific notified equipment |
Rates are indicative; verify the exact class against Appendix I on incometax.gov.in. Goodwill of a business or profession is no longer a depreciable asset.
Additional Depreciation & the 180-Day Rule
A manufacturing or production business (or power generation) can claim 20% additional depreciation on the cost of new plant and machinery, over and above the normal 15%. It is a one-time boost in the year of installation.
| Situation | Rate | Reason |
|---|---|---|
| New P&M in manufacturing, used > 180 days | Full 20% | Full additional depreciation in year 1 |
| New P&M in manufacturing, used ≤ 180 days | 10% now | Balance 10% allowed the next year |
| Any asset put to use ≤ 180 days (normal depn.) | Half rate | 50% of the block rate in the first year |
| Second-hand machinery | Not eligible | Additional depreciation needs new assets |
| Office equipment, furniture, buildings, vehicles | Not eligible | Additional depreciation is for P&M in manufacturing |
If an asset is acquired and put to use for less than 180 days in the year of purchase, only half the normal rate is allowed that year (e.g. 20% instead of 40% on a computer). The full rate resumes from the next year. Plan large capital purchases before the 30 September cut-off of the financial year to claim the full first-year depreciation.
Buying plant, machinery or IT assets for your business this year?
Talk to a Tax Expert →Block of Assets — Worked Example
Assets are not depreciated one by one. All assets of the same class and rate form a block. Add the cost of new assets, deduct sale proceeds of assets sold, and charge depreciation on the net WDV of the whole block at the block rate.
| Step | Amount (example) |
|---|---|
| Opening WDV — Plant & Machinery block (15%) | ₹20,00,000 |
| Add: new machinery purchased | ₹5,00,000 |
| Less: machinery sold (sale proceeds) | ₹3,00,000 |
| Net WDV for depreciation | ₹22,00,000 |
| Depreciation @ 15% | ₹3,30,000 |
| Closing WDV (carried to next year) | ₹18,70,000 |
If sale proceeds exceed the block WDV and the block still has assets, no depreciation is charged and a short-term capital gain arises. If the block ceases to exist, a terminal loss or short-term capital gain results.
Since AY 2002-03, depreciation under Section 32 is compulsory — it is deemed to have been allowed whether or not you claim it, and the block WDV is reduced accordingly. You cannot skip depreciation in a loss year to preserve a higher WDV for later.
How Much Tax Does Depreciation Save?
Depreciation is a non-cash deduction — no money leaves the business, yet taxable profit falls. The tax saved equals the depreciation amount times your applicable rate. Here is the first-year effect on two common assets.
Computer — 40%
Plant & machinery — 15%
Add 20% additional depreciation to that ₹50 lakh machinery (35% total in year 1) and depreciation rises to ₹17.5 lakh — a first-year tax saving of about ₹5.25 lakh at 30%. Depreciation is one of the biggest legitimate levers for business cash flow. See the income-tax slabs for the rate that applies to you.
If you opt for presumptive taxation under Section 44AD or 44ADA, depreciation is deemed already allowed in the presumptive profit — the WDV of your block is still reduced each year even though you do not claim depreciation separately. Regular books-of-account taxpayers claim it in full.
Want us to compute depreciation and file your business return?
Get ITR Filing Help →Depreciation Under Income Tax — Frequently Asked Questions
Related TaxClue services
Depreciation, Blocks & Business ITR — Sorted
Our CA-led team builds your Section 32 depreciation schedule, applies the right rates, additional depreciation and the 180-day rule, and files your business return accurately — 100% online, across India.