Introduction
Depreciation is a critical concept in taxation and accounting. Under Section 32 of the Income Tax Act, 1961, depreciation allows taxpayers to claim a deduction for the gradual wear and tear of tangible and intangible assets used in business or profession. It ensures that the cost of assets is spread across their useful life, aligning tax deductions with economic reality.For FY 2025-26, depreciation continues to be calculated either on the Written Down Value (WDV) method or the Straight Line Method (SLM). The Income Tax Act prescribes specific rates for different blocks of assets, ensuring uniformity and fairness in tax computation
Depreciation Rates (WDV Method)
The WDV method is the default method applicable to most businesses. Assets are grouped into blocks, and depreciation is applied to the block as a whole rather than individual assets. Below is the detailed chart:
Sr No Particulars of Asset Rate of Depreciation
1 Buildings used mainly for residential purposes (except hotels & boarding houses) 5%
2 Buildings other than residential (including offices, factories, godowns, hotels) 10%
3 Purely temporary erections such as wooden structures 40%
4 Furniture & fittings including electrical fittings 10%
5 Plant & machinery (general) 15%
6 Motor cars (not used for hire) 15%
7 Motor cars, other than those used in a business of running them on hire, acquired on or after the 23rd day of August, 2019 but before the 1st day of April, 2020 and is put to use before the 1st day of April, 2020. 30%
8 Motor buses, lorries, taxis used for hire 30%
9 Motor buses, motor lorries and motor taxis used in a business of running them on hire, acquired on or after the 23rd day of August, 2019 but before the 1st day of April, 2020 and is put to use before the 1st day of April, 2020. 45%
10 Aeroplanes, aero engines 40%
11 Ships 20%
12 Computers including software 40%
13 Life saving medical equipment 40%
14 Energy saving devices 40%
15 Books (annual publications) 100%
16 Books (other than annual publications) 60%
17 Gas cylinders, containers 40%
18 Rolling mills, steel plant machinery 40%
19 Intangible assets (goodwill, patents, trademarks, licenses, franchises, know-how) 25%
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Notes (WDV Method)
• Depreciation is calculated on the block of assets, not individual items.
• If an asset is acquired and put to use for less than 180 days in the year, only 50% of the rate is allowed.
• Additional depreciation of 20% is available for new plant and machinery acquired by manufacturing undertakings.
• Certain specialized assets (like books, gas cylinders, rolling mills) enjoy higher rates due to faster wear and tear.
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Depreciation Rates (SLM Method)
The Straight Line Method is applicable primarily to undertakings engaged in generation or distribution of power. Instead of fixed rates, assets are depreciated based on their useful life.
Sr No Particulars of Asset Life of Asset (Years)
1 Buildings (RCC Frame Structure, other than factory buildings) 60
2 Buildings (other than RCC Frame Structure, including factory buildings) 30
3 Fences, wells, tube wells 5
4 Temporary structures, others 3
5 Bridges, culverts, bunders 30
6 Carpeted Roads – RCC 10
7 Carpeted Roads – other than RCC 5
8 Non-carpeted Roads 3
9 Plant & Machinery (general) 15
10 Continuous process plant (not covered under special industries) 25
11 Cinematograph film machinery & projecting equipment 13
12 Glass manufacturing – furnaces 13
13 Glass manufacturing – moulds 8
14 Float glass melting furnaces 10
15 Mines & quarries – portable machinery 8
16 Telecom towers 18
17 Telecom equipment (switching, transmission, etc.) 13
18 Telecom ducts, cables, optical fibre, satellites 18
19 Oil & gas – refineries, assets, petrochemical plant, storage tanks, drilling rigs 25
20 Oil & gas – pipelines 30
21 Oil & gas – field operations equipment, loggers 8
22 Power generation – Thermal, Hydro, Nuclear, Transmission lines 40
23 Wind Power Plant 22
24 Electric Distribution Plant 35
25 Gas Storage & Distribution Plant, Water Distribution Plant 30
26 Steel – Sinter Plant, Blast Furnace, Coke Ovens, Rolling Mill 20
27 Steel – Basic Oxygen Furnace Converter 25
28 Non-ferrous metals – major equipment (pot line, digester, turbine, calcination, copper smelter, roll grinder) 40
29 Non-ferrous metals – Soaking Pit, Annealing Furnace, Rolling Mills, Scalping/Slitting equipment 30
30 Non-ferrous metals – Surface Miner, Ripper Dozer, Copper refining plant 25
31 Medical diagnostic equipment (X-ray, ECG, Ultrasound, etc.) 13
32 Other medical equipment 15
33 Pharmaceuticals – reactors, distillation, drying, tanks 20
34 Civil construction – concreting, crushing, piling, road making 12
35 Civil construction – cranes >100 tons 20
36 Civil construction – cranes <100 tons 15
37 Civil construction – transmission line, tunneling equipment 10
38 Civil construction – earth-moving equipment 9
39 Civil construction – other construction equipment 12
40 Salt works machinery 15
41 Furniture & fittings (general) 10
42 Furniture in hotels, restaurants, schools, theatres, etc. 8
43 Motor cycles, scooters, mopeds 10
44 Motor buses, lorries, cars, taxis (used for hire) 6
45 Motor buses, lorries, cars (not used for hire), tractors, harvesters, heavy vehicles, electric vehicles 8
46 Ocean-going ships – bulk carriers, liners, passenger vessels, coastal ships 25–30
47 Crude/product/chemical tankers 20–25
48 Offshore supply/support vessels, catamarans, high-speed boats 20
49 Drill ships 25
50 Hovercrafts 15
51 Fishing vessels (wooden hull) 10
52 Dredgers, tugs, barges, survey launches 14
53 Inland water vessels – speed boats 13
54 Inland water vessels – others 28
55 Aircrafts & helicopters 20
56 Railways sidings, locomotives, rolling stock, tramways 15
57 Ropeway structures 15
58 Office equipment 5
59 Computers – servers & networks 6
60 Computers – desktops, laptops 3
61 Laboratory equipment (general) 10
62 Laboratory equipment (educational institutions) 5
63 Electrical installations & equipment 10
64 Hydraulic works, pipelines, sluices 15
Key Notes
• Blocks with identical useful lives have been combined for clarity (e.g., multiple steel plant assets grouped under 20 years).
• NESD = No Extra Shift Depreciation.
• Double shift increases depreciation by 50%, triple shift by 100%.
• Factory buildings exclude offices, godowns, staff quarters.
• Additions/disposals during the year require pro-rata depreciation.
• If a part of an asset has a significantly different useful life, it should be depreciated separately.
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Conclusion
Depreciation under the Income Tax Act for FY 2025-26 remains a cornerstone of tax planning and compliance. By categorizing assets into blocks and prescribing uniform rates, the law ensures fairness and simplicity.
• WDV Method applies to most businesses, with rates ranging from 5% for residential buildings to 100% for annual publications.
• SLM Method applies to power generation undertakings, with depreciation spread across useful life.
• Proper classification and compliance not only optimize tax deductions but also prevent disputes during assessments.
Depreciation is more than a statutory deduction, it reflects the economic reality of asset usage. Businesses should maintain accurate records, classify assets correctly, and apply the prescribed rates diligently to ensure smooth compliance in FY 2025-26.
Blog by : Mittal & Co.