The depreciation provisions applicable from Tax Year 2026-27 have undergone a significant structural change. With the enactment of the new Income-tax Act, 2025, all depreciation provisions previously governed under Section 32 of the Income-tax Act, 1961 have been consolidated and re-enacted under Section 34 of the new Act. The rates, however, remain largely unchanged, ensuring continuity for businesses and professionals during the transition.
This article provides a comprehensive ready-reckoner of applicable depreciation rates for all major blocks of assets for Tax Year 2026-27, along with key rules, practical notes, and important conditions practitioners and businesses must be aware of.
Legal Framework – Section 32 to Section 34
Effective 1st April 2026, the Income-tax Act, 2025 came into force, replacing the Income-tax Act, 1961 for Tax Year 2026-27 onwards. Key legislative changes relevant to depreciation are:
- Old Provision: Section 32 of the Income-tax Act, 1961 governed depreciation on tangible and intangible assets.
- New Provision: Section 34 of the Income-tax Act, 2025 is the equivalent provision, with the same block-of-assets concept and Written Down Value (WDV) method retained.
- Transition: All existing WDV balances as on 31st March 2026 carry forward to Tax Year 2026-27 under the new Act without any adjustment.
- Rates: Depreciation rates remain unchanged. The chart below reflects rates under Section 34 alongside the old Section 32 reference for ease of transition.
Depreciation Rate Chart — All Asset Blocks
The following table sets out the applicable depreciation rates for all major blocks of assets for Tax Year 2026-27:
| Block of Assets | Sub-Category | Nature of Asset | Section (2025) | Rate (%) |
| BUILDING | Residential | Buildings used mainly for residential purposes | 34 | 5% |
| BUILDING | Non-Residential | Buildings other than residential | 34 | 10% |
| BUILDING | Infrastructure | Water supply / treatment projects (80-IA) | 34 | 40% |
| BUILDING | Temporary | Wooden / temporary structures | 34 | 40% |
| FURNITURE & FITTINGS | General | Furniture, electrical fittings, wiring, fans, etc. | 34 | 10% |
| PLANT & MACHINERY | General | Plant & machinery (other than specified) | 34 | 15% |
| MOTOR VEHICLES | Motor Vehicles | Motor cars (normal use) | 34 | 15% |
| MOTOR VEHICLES | Motor Vehicles | Motor cars (specified higher rate cases) | 34 | 30% |
| MOTOR VEHICLES | Hire Business | Motor buses, lorries, taxis (on hire) | 34 | 30% / 45% |
| AIRCRAFT | General | Aeroplanes / aeroengines | 34 | 40% |
| SPECIAL INDUSTRY | General | Moulds (rubber/plastic) | 34 | 30% |
| ENVIRONMENT CONTROL | Air | Air pollution control equipment | 34 | 40% |
| ENVIRONMENT CONTROL | Water | Water pollution control equipment | 34 | 40% |
| ENVIRONMENT CONTROL | Solid Waste | Solid waste control equipment | 34 | 40% |
| MEDICAL EQUIPMENT | Specialized | Lifesaving medical equipment | 34 | 40% |
| HIGH-RATE BLOCK | IT Assets | Computers & software | 34 | 40% |
| HIGH-RATE BLOCK | Containers | Glass / plastic containers | 34 | 40% |
| HIGH-RATE BLOCK | Textile | TUFS machinery | 34 | 40% |
| ENERGY SAVING DEVICES | Boilers | Boilers & furnaces | 34 | 40% |
| ENERGY SAVING DEVICES | Monitoring | Energy monitoring systems | 34 | 40% |
| ENERGY SAVING DEVICES | Recovery | Waste heat recovery systems | 34 | 40% |
| ENERGY SAVING DEVICES | Power | Co-generation systems | 34 | 40% |
| ENERGY SAVING DEVICES | Electrical | Energy efficient electrical equipment | 34 | 40% |
| INDUSTRY SPECIFIC | Gas | Gas cylinders | 34 | 40% |
| INDUSTRY SPECIFIC | Glass | Glass furnaces | 34 | 40% |
| INDUSTRY SPECIFIC | Oil Sector | Mineral oil equipment | 34 | 40% / 15% |
| RENEWABLE ENERGY | General | Solar, wind, biogas, EV equipment | 34 | 40% |
| BOOKS & PUBLICATIONS | Professional | Books owned by professionals / libraries | 34 | 40% |
| BOOKS & PUBLICATIONS | Annual/Other | Annual / other publications | 34 | 40% |
| SHIPS | Ocean | Ocean-going ships | 34 | 20% |
| SHIPS | Inland | Inland vessels | 34 | 20% |
| INTANGIBLE ASSETS | General | Patents, trademarks, licenses, franchise | 34 | 25% |
* 30%/45% applicable based on specific transport undertaking classification. 40%/15% for mineral oil equipment depends on nature of use.
Key Rules & Important Conditions
1. Written Down Value (WDV) Method
Depreciation under Section 34 is calculated on the WDV of the entire block of assets, not on individual assets. All assets of the same block are pooled together, and depreciation is applied on the aggregate WDV at the beginning of the year, after adding new acquisitions and deducting sale proceeds of assets disposed during the year.
2. Half-Year Rule (180-Day Rule)
Assets acquired and put to use for less than 180 days during the financial year are entitled to only 50% of the normal depreciation rate applicable to that block. This rule prevents full-year depreciation claims on assets purchased late in the year. Businesses should track the actual date of commissioning carefully to apply this rule correctly.
3. Block-Wise Pooling & Asset Disposal
Since depreciation is block-wise, the sale of an individual asset does not trigger capital gains or cessation of depreciation unless the entire block is wiped out. If sale proceeds exceed the WDV of the entire block, the excess is treated as a short-term capital gain (STCG). If the WDV of the block becomes nil or negative, no further depreciation is allowed on that block.
4. Conditional Rates at 40%
Several asset categories enjoy a higher depreciation rate of 40%, but this is subject to conditions:
- Pollution Control Equipment: Must be certified equipment specifically used for controlling air, water, or solid waste pollution.
- Energy Saving Devices: Includes boilers, furnaces, co-generation systems, waste heat recovery units, etc. Applicable certificates from relevant authorities may be required.
- Renewable Energy Assets: Solar panels, wind turbines, biogas plants, and EV charging equipment qualify at 40%, subject to use for business purposes.
5. Motor Vehicles: Three-Tier Rate Structure
Motor vehicles have a three-tier depreciation structure that requires careful classification:
- Normal motor cars used for business purposes (not for hire).
- Motor cars eligible for higher rate (used for specified business purposes or as per CBDT notification).
- Motor buses, lorries, and taxis plying for hire. The 45% rate applies to vehicles used in specific transport undertakings.
6. Intangible Assets: Separate Block
Intangible assets- patents, trademarks, copyrights, licences, franchises, and other similar rights-form a separate block from tangible assets. The depreciation rate applicable is 25% on WDV. Know-how acquired for business purposes is also included in this block. Self-generated intangibles do not qualify for depreciation.
7. Computers & Software: 40% High-Rate Block
Computers and peripherals, including software, are classified in the high-rate block with a 40% depreciation rate. This includes servers, laptops, desktops, and application/system software. Given the rapid pace of technology obsolescence, this higher rate reflects the practical economic life of IT assets.
Practical Implications for Businesses
The transition from Section 32 to Section 34 brings with it a need for accounting and tax teams to update their internal documentation. Some practical action points:
1. Update Fixed Asset Registers: All FAR entries should now reference Section 34 instead of Section 32 for Tax Year 2026-27 onwards.
2. WDV Carry-Forward: Confirm that the closing WDV as on 31st March 2026 is correctly carried forward as the opening WDV for Tax Year 2026-27.
3. Asset Commissioning Dates: Maintain documentary evidence of the date each asset was put to use, especially for assets acquired after 1st October 2026, to apply the 180-day rule correctly.
4. IT & Software Classification: Cloud-based SaaS subscriptions are typically not depreciable assets; only perpetual software licences qualify for the 40% rate. Review contracts carefully.
5. Additional Depreciation: Businesses engaged in manufacturing or power generation may be eligible for additional depreciation on eligible new plant & machinery. Verify applicability under Section 34 of the new Act.
Important Notes at a Glance
| 1 | From 1st April 2026, Section 32 (old Act) is replaced by Section 34 (new Income-tax Act, 2025). Rates remain the same. |
| 2 | Depreciation is on WDV of the entire block — not individual assets. |
| 3 | Half-year rule: Assets used for less than 180 days attract only 50% of normal rate. |
| 4 | Block-wise pooling: Depreciation continues even if some assets within the block are sold. |
| 5 | 40% rate for pollution control, energy saving, and renewable energy assets requires certification. |
| 6 | Motor vehicles: 15% (normal), 30% (eligible use), 30%/45% (hire vehicles). |
| 7 | No depreciation if block WDV becomes zero or negative, or if asset is not used for business. |
| 8 | Intangible assets (patents, trademarks, licences) depreciate at 25% — separate from tangible blocks. |
| 9 | Computers & software depreciate at 40%. Verify whether the asset qualifies as owned software. |
| 10 | Additional depreciation may apply for eligible manufacturing assets — verify separately. |
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Disclaimer: This article and the rate chart are prepared for general informational purposes based on the Income-tax Act, 2025 and applicable rules as on date. They do not constitute professional advice. Rates, conditions, and provisions should be verified with the bare Act, Income-tax Rules, official notifications, and your tax advisor before taking any decision.
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