Can I Claim Depreciation on Business Assets as a Business Expense in India?
Yes: depreciation on tangible and intangible business assets is deductible under Section 32 of the Income Tax Act at prescribed rates using the Written-Down Value (WDV) method. The key rates are: computers/software 40%, general plant and machinery 15%, furniture 10%, vehicles 15-30%, buildings 5-10%. Assets bought after 3 October in the financial year get only 50% of the rate for that year.
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What Income Tax Department (CBDT) says
Section 32 IT Act 1961 read with Rule 5 and Appendix I of Income Tax Rules. WDV block-of-assets system: all assets of the same rate class form one block. Additional depreciation at 20% in the first year for new plant and machinery used in manufacturing (Section 32(1)(iia)). Companies under Section 115BAA can claim normal depreciation but not additional depreciation.
When you can claim
- Computers, laptops, and IT peripherals (40% WDV)
- Accounting and business software licences (40% WDV)
- Office furniture (10% WDV)
- General plant and machinery (15% WDV)
- Company-owned cars and two-wheelers (15% or 30% WDV)
- Factory and manufacturing equipment with additional 20% first-year depreciation
- Intangible assets such as patents, trademarks and licences, depreciated at 25% WDV
When you cannot claim
- Assets not used for business purposes (personal assets of directors)
- Goodwill (from AY 2021-22, goodwill is no longer depreciable under IT Act)
- Land (never depreciable)
- Depreciation on assets that were not put to use in the year, which is claimed in the year they are first used
Good to know
Pro tip: Claim additional depreciation (20% extra in year 1) on new manufacturing plant and machinery. This is a significant first-year benefit. For computers and software, the 40% rate means the asset is largely written off in 3 years. Note that goodwill was removed from eligible assets in AY 2021-22; companies that paid goodwill on acquisition can no longer depreciate it for tax purposes. Review your asset register.
Important: Depreciation is computed on the block of assets and starts from the date the asset is put to use. Where an asset is used for fewer than 180 days in the year, only half the rate is allowed in that year. Companies that elect Section 115BAA give up additional depreciation. Which Act applies depends on the year. Income earned up to 31 March 2026 (FY2025-26, assessed in AY2026-27) is governed by the Income Tax Act, 1961. From 1 April 2026 the Income-tax Act, 2025 applies for tax year 2026-27, and its section numbers differ from the 1961 Act cited here. The TDS sections 192 to 194T are consolidated into sections 392 and 393, and the TDS rates and thresholds were retained.
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