Depreciation Rates - Income Tax Act, 1961

Section 32, Appendix I - Written Down Value (WDV) Method

Under the Income Tax Act, depreciation is calculated on a **Block of Assets** at fixed percentage rates on the Written Down Value. An asset's identity is not maintained individually.

Key Principles and Important Provisions

  • **Block of Assets:** A group of assets falling in the same class (e.g., Buildings, Plant & Machinery, Furniture) with the same depreciation rate.
  • **WDV Method:** Depreciation is calculated on the closing balance of the asset block from the previous year. This is the primary method for most assets.
  • **Pro-rata Rule (Less than 180 days):** If an asset is purchased and put to use for less than **180 days** during the financial year, only **50%** of the normal depreciation rate is allowed in that year. The remaining depreciation can be claimed in subsequent years.
  • **Additional Depreciation:** An extra 20% depreciation is allowed on new plant and machinery (except those used in offices or residences) for manufacturing or power generation businesses. This is in addition to the normal depreciation. The 180-day rule also applies to this.
I. Tangible Assets
Buildings
Nature of Assets WDV Depreciation Rate (%)
Buildings used mainly for residential purposes (excluding hotels and boarding houses) 5%
Buildings used for business purposes (non-residential) 10%
Hotels and Boarding Houses 10%
Purely temporary structures (e.g., wooden structures) 40%
Furniture and Fittings
Nature of Assets WDV Depreciation Rate (%)
Furniture and fittings, including electrical fittings 10%
Plant and Machinery
Nature of Assets WDV Depreciation Rate (%)
General Plant & Machinery (not covered in other categories) 15%
Motor cars, other than those used in a business of running them on hire 15%
Motor buses, lorries, and taxis used in a business of running them on hire 30%
Computers, including software 40%
Airplanes and aero engines 40%
Books owned by a professional (annual publications) 40%
Ships 20%
Equipment for pollution control, energy-saving devices, etc. 40%
II. Intangible Assets
Nature of Assets WDV Depreciation Rate (%)
Know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature 25%