Depreciation U/s 32: Latest WDV Rates & Rules Explained
Table of Contents
All about Depreciation Rates Under the Income-tax Act, 1961
Depreciation Under Section 32 of the Income Tax Act, 1961ย
Section 32 of the Income Tax Act allows businesses and professionals to claim depreciation as a tax deduction on assets used for business or professional purposes. Depreciation is generally calculated using the written-down value method, where assets are grouped into blocks and depreciation is allowed on the block’s WDV. The following are the commonly used written-down value depreciation rates applicable under the income tax rules:
| Asset Category | Depreciation Rate (WDV) |
|---|---|
| Buildings (Residential) | 5% |
| Buildings (Commercial / Office / Factory) | 10% |
| Furniture and Fittings | 10% |
| Plant and Machinery (General) | 15% |
| Motor Vehicles (Personal / General Business Use) | 15% |
| Motor Vehicles Used on Hire (Rent, Taxi, etc.) | 30% |
| Computers, Laptops & Software | 40% |
| Electric Vehicles (EVs) | 40% |
| Intangible Assets (Patents, Trademarks, Licenses, Franchises, etc.) | 25% |
Key Rules and Conditions related to depreciationย
- 180-Day Rule: If an asset is acquired and put to use for less than 180 days during the financial year, only 50% of the normal depreciation can be claimed in that year.
- Additional Depreciation: Manufacturing and power-generation businesses can claim an additional 20% depreciation on eligible new plant and machinery, and If the asset is used for less than 180 days, additional depreciation is restricted to 10% in the year of acquisition.
- Block of Assets Concept: Depreciation is not calculated asset-wise. Similar assets carrying the same depreciation rate are grouped into a block of assets, and depreciation is calculated on the aggregate WDV of that block.
- Straight-Line Method (SLM) : While WDV is the standard method, businesses engaged in the generation or distribution of power may opt for the Straight-Line Method (SLM).
- Personal Use Assets: Depreciation is allowed only on assets used for business or professional purposes. Assets used exclusively for personal purposes are not eligible for depreciation.
- Written Down Value Method: Depreciation under the Income Tax Act is generally allowed on the WDV method, where depreciation is calculated on the opening WDV of the block of assets.
- Assets Used for Less Than 180 Days: If an asset is acquired during the financial year and is put to use for less than 180 days, only 50% of the applicable depreciation can be claimed in that year. Examples: A computerย purchased and used for less than 180 days:
- Normal rate = 40%
- Eligible depreciation = 20%
- Plant & machinery used for less than 180 days:
- Normal rate = 15%
- Eligible depreciation = 7.5%
Quick WDV depreciation rates applicable under the Income Tax Rules:
Depreciation u/s 32 helps businesses reduce taxable income by recognizing the wear and tear of business assets. The written-down value method, block of assets concept, 180-day rule, and additional depreciation provisions are important factors that taxpayers should consider while computing depreciation and preparing their income tax returns. details about depreciation rate here under :
- Residential Building โ 5%
- Commercial Building โ 10%
- Furniture & Fixtures โ 10%
- Plant & Machinery โ 15%
- Motor Car (Business Use) โ 15%
- Motor Vehicle Used on Hire โ 30%
- Computers & Software โ 40%
- Electric Vehicles โ 40%
- Patents, Trademarks & Other Intangible Assets โ 25%
- These rates are widely used for income-tax computation, tax audits, and business income tax return filings under the block-of-assets concept.
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