Deduction for depreciation
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 33(1) of Income Tax Act 2025
33(1) A deduction in respect of depreciation of—
- (a) buildings, machinery, plant or furniture, being tangible assets;
- (b) know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired, not being goodwill of a business or profession, owned wholly or partly by the assessee and used wholly and exclusively for the purposes of the business or profession, shall be allowed, as per the provisions of this section.
Section 33(2) of Income Tax Act 2025
33(2) In case of assets referred to in sub-section (1) of an undertaking engaged in generation or generation and distribution of power, the depreciation shall be a percentage of its actual cost to the assessee, as prescribed.
Section 33(3) of Income Tax Act 2025
33(3)(a) In case of any block of assets, depreciation shall be a percentage of its written down value, as prescribed;
33(3)(b) when any asset forming part of the block of assets is partly, or not wholly and exclusively, used for the purposes of the business or profession, the deduction allowable shall be restricted to the fair proportionate part thereof as determined by the Assessing Officer, having regard to the usage for the purposes of the business or profession;
33(3)(c) when deduction of actual cost in respect of any machinery or plant has been allowed under section 54, no deduction under this sub-section shall be allowed.
Section 33(4) of Income Tax Act 2025
33(4) The deduction under this section shall be restricted to 50% of the prescribed rate, if such asset, being asset referred to in sub-sections (1), (2) and (8) is––
- (a) acquired by the assessee during the tax year; and
- (b) put to use for the purposes of business or profession for less than one hundred and eighty days in that tax year.
Section 33(5) of Income Tax Act 2025
33(5) The allowable deduction calculated at the prescribed rates under this section shall be allowed on pro rata basis based on number of days for which assets were used by the following:––
- (a) predecessor and successor, in case of a succession under section 70(1)(zd) or (ze) or (zf), or section 313; or
- (b) amalgamating company and the amalgamated company in case of an amalgamation; or
- (c) demerged company and the resulting company in case of a demerger.
Section 33(6) of Income Tax Act 2025
33(6) Where a building, not owned by the assessee, is held on lease or by any other right of occupancy is used for the purposes of business or profession, and if any capital expenditure is incurred by the assessee for the purposes of business or profession on construction of any structure or any work by way of renovation, extension or improvement to such building, then such structure or work shall be treated as a building owned by the assessee for the purposes of this section.
Section 33(7) of Income Tax Act 2025
33(7) The provisions of this section shall apply even when the assessee has not claimed deduction for depreciation in computing the total income.
Section 33(8) of Income Tax Act 2025
33(8) Further sum in addition to deduction under sub-section (3) shall be allowed, when–—
- (a) the assessee is engaged in the business of manufacture or production of any article or thing or in the business of generation, transmission or distribution of power;
- (b) the assessee acquires and installs any new machinery or plant;
- (c) the new machinery or plant is first put to use by the assessee for the purposes of business; and
- (d) the new machinery or plant—
- (i) is not a ship or an aircraft;
- (ii) was not used either within or outside India by any other person before its installation by the assessee;
- (iii) is not installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house;
- (iv) is not in the nature of any office appliances or road transport vehicle; and
- (v) is not of a class of asset on which the whole of the actual cost is allowable as a deduction (whether by way of depreciation or otherwise) in computing the income under the head “Profits and gains of business or profession” of any tax year.
Section 33(9) of Income Tax Act 2025
33(9) The additional deduction referred to in sub-section (8) shall be––
- (a) 20% of the actual cost of the new machinery or plant in the tax year when it is acquired and put to use; or
- (b) 10% of the actual cost, if the new machinery or plant is acquired and put to use for less than one hundred and eighty days in the relevant tax year, and the remaining 10% shall be allowed in the immediately succeeding tax year.
Section 33(10) of Income Tax Act 2025
33(10) The difference between the written down value and the money payable including the scrap value, if any, shall be allowed as deduction when any tangible asset in respect of which depreciation is claimed and allowed under sub-section (2)––
- (a) is sold, discarded, demolished or destroyed in the tax year not being the tax year in which it is first put into use;
- (b) the money payable including the scrap value, if any, is less than its written down value; and
- (c) such deficiency is actually written off in the books of account of the assessee.
Section 33(11) of Income Tax Act 2025
33(11)(a) Where the profits and gains chargeable for the tax year before allowing the deduction under sub-section (1) is less than the allowable deduction under that sub-section, then––
- (i) if such profits and gains is not a loss, the deduction under sub-section (1) shall be allowed to the extent of the available profits and gains;
- (ii) if such profits and gains is a loss, no deduction under sub-section (1) shall be allowed;
33(11)(b) the amount of deduction which has not been allowed under clause (a) shall be added to the allowable deduction under this section, whether available or not, for the succeeding tax year and the total amount shall be deemed to be eligible for deduction in that year, and so on for the succeeding tax years;
33(11)(c) the provisions of this sub-section shall be subject to the provisions of sections 112(3) and 113(4); and
33(11)(d) any deduction in respect of any depreciation carried forward to the succeeding tax year under this sub-section shall be deemed to be depreciation, actually allowed.
Section 33(12) of Income Tax Act 2025
33(12) In this section,––
- (a) “assets” mean—
- (i) tangible assets, being buildings, machinery, plant or furniture;
- (ii) intangible assets being––
- (A) know-how;
- (B) patents;
- (C) copyrights;
- (D) trademarks;
- (E) licences;
- (F) franchises; or
- (G) any other similar business or commercial rights, but not being goodwill of a business or profession;
- (b) “know-how” means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil-well or other sources of mineral deposits (including searching for discovery or testing of deposits for the winning of access thereto);
- (c) “sold” includes a transfer by way of exchange or a compulsory acquisition under any law for the time being in force but does not include a transfer, in a scheme of amalgamation, of any asset by the amalgamating company to the amalgamated company where the amalgamated company is an Indian company or in a scheme of amalgamation of a banking company, as referred to in section 5(c) of the Banking Regulation Act, 1949 with a banking institution as referred to in section 45(15) of the said Act, sanctioned and brought into force by the Central Government under section 45(7) of that Act, of any asset by the banking company to the banking institution;
- (d) “written down value of the block of assets” shall have the same meaning as in section 41(1)(Table: Sl. No. 3)
FAQs on Section 33 of Income Tax Act 2025
1. What assets are eligible for depreciation under Section 33?
Both tangible assets (like buildings, machinery, furniture) and intangible assets (like patents, trademarks, licences) are eligible—excluding goodwill.
2. Is ownership necessary for claiming depreciation?
Yes, the assessee must own the asset wholly or partly, and it must be used wholly and exclusively for business/profession.
3. Are there special rules for power companies?
Yes. Undertakings engaged in generation or distribution of power must compute depreciation as a percentage of actual cost, as prescribed.
4. How is depreciation calculated on block of assets?
It is based on the written down value (WDV) of the block, applying the prescribed rate.
5. What if an asset is used partly for personal purposes?
Depreciation is allowed only on the business-use portion, as determined by the Assessing Officer.
6. Can depreciation be claimed on assets already covered under Section 54?
No. If depreciation or deduction was claimed under Section 54, it cannot be claimed again under Section 33(3).
7. What if an asset is used for less than 180 days?
Then only 50% of the prescribed depreciation rate is allowed for that tax year.
8. How is depreciation divided during business succession?
It’s split pro-rata between predecessor and successor, or amalgamating/demerging entities, based on the number of days used.
9. Can depreciation be claimed on leased buildings?
Yes, if the assessee incurs capital expenditure (e.g., renovations or extensions), the structure is treated as owned by the assessee.
10. Is claiming depreciation mandatory?
Yes, it is deemed to be claimed even if not explicitly claimed by the assessee.
11. Who is eligible for additional depreciation?
Businesses engaged in manufacturing or power sectors that acquire and install new machinery or plant.
12. What is the rate of additional depreciation?
- 20% of actual cost, if used for ≥180 days
- 10% if <180 days in year of use, with 10% allowed in next year
13. What conditions disqualify assets from additional depreciation?
Assets must be new, not:
- Used earlier
- Installed in offices/residences
- Office appliances or road transport vehicles
- Ships/aircrafts
- 100% deductible assets
14. What happens when a depreciated asset is sold or discarded?
If WDV > amount received (incl. scrap), the deficiency is allowed as deduction, provided it’s written off in the books.
15. What if depreciation exceeds profits?
Only allowed up to profit amount (if no loss)
- If a loss, no depreciation is allowed that year
- Unabsorbed depreciation is carried forward and deemed as current year’s depreciation
16. What is “know-how” under depreciation rules?
It includes industrial information or techniques useful in manufacturing or mining processes.
17. What does “sold” mean under Section 33?
Includes sale, exchange, or compulsory acquisition—but not transfers in amalgamations involving Indian companies or banks under specific conditions.
18. What is WDV (Written Down Value)?
Defined under Section 41(1)—it is the value after deducting depreciation from the original cost of a block of assets.
19. Is goodwill eligible for depreciation?
No, goodwill is explicitly excluded from the list of intangible assets eligible for depreciation.
20. Can depreciation be voluntarily skipped in a year?
No. Even if not claimed, it’s treated as “actually allowed”.
Section 33 provides a structured and comprehensive mechanism for claiming depreciation on both tangible and intangible business assets. It ensures equitable tax benefits by allowing usage-based, time-based, and activity-based deductions, while also preventing double benefits.
Additional provisions incentivize industrial growth through enhanced depreciation for new manufacturing assets. The carry-forward and pro-rata allocation rules offer continuity in transitions like mergers or successions. Overall, Section 33 balances fair tax relief with robust compliance safeguards, making it a critical provision for business tax planning.
