Depreciation Rates Under Income Tax Act for AY 2025-26

Full Chart & Insights

In the world of taxation and accounting, depreciation plays a vital role in reducing taxable profits and optimizing tax liability. Under the Income Tax Act, 1961, depreciation is allowed as a deduction for assets used in business or profession. For Assessment Year (AY) 2025–26, knowing the correct depreciation rates and applicable rules is essential for accurate tax filing and financial planning.

This blog provides a complete guide on depreciation rates under the Income Tax Act, including the latest chart, categories, and key insights for AY 2025–26.

🧾 What is Depreciation Under Income Tax?

Depreciation is a reduction in the value of a fixed asset due to wear and tear over time. The Income Tax Act allows businesses to claim depreciation as a deduction under Section 32, based on specified rates, to account for the decrease in value of tangible and intangible assets used for business.

📌 Key Conditions for Claiming Depreciation

• The asset must be owned (wholly or partly) by the assessee.

• It should be used for the purpose of business or profession during the financial year.

• Depreciation is allowed on a block of assets basis (group of assets having same rate).

• If the asset is used for less than 180 days, only 50% of the eligible depreciation is allowed.

🗂️ Types of Depreciation

1. Normal Depreciation – Allowed as per the prescribed rates.

2. Additional Depreciation – Allowed under Section 32(1)(iia) for new machinery used in manufacturing (only for certain assessees).

📊 Depreciation Rate Chart for AY 2025-26 (FY 2024-25)

Below is a simplified chart of the commonly used depreciation rates as per the Income Tax Rules:

📌 Tangible Assets

📌 Intangible Assets

📝 Note: Additional depreciation @20% is available for new plant & machinery (not for building or second-hand assets) used in manufacturing, under specific conditions.

🧮 Example Calculation

Suppose you buy machinery worth ₹10,00,000 on 1st October 2024 (used for more than 180 days in FY 2024-25).

• Depreciation Rate: 15%

• Full depreciation allowed: ₹1,50,000

• Net block after depreciation: ₹8,50,000

If used for less than 180 days, only ₹75,000 (50%) would be allowed in FY 2024–25. The remaining can be claimed in the next year.

🚫 Common Mistakes to Avoid

• Not capitalizing expenses properly.

• Claiming depreciation on personal assets.

• Missing half-year rule (180 days usage).

• Forgetting to claim additional depreciation (where eligible).

📌 Recent Updates & Insights

• No major change in depreciation rates for AY 2025–26.

• High-value cars (especially luxury) may have capped depreciation.

• For businesses opting for the new tax regime under Section 115BAA or 115BAC, additional depreciation is not allowed.

Frequently Asked Questions