Section 33 · Computation of total income
Section 33 of the Income-tax Act, 2025 — Deduction for Depreciation on Business Assets
By CA Rajat Agrawal
Updated 04 Jul 2026
Chapter IV
📜 What the law says — Section 33, 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 on or after the 1st April, 1998, 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.
(2) In case of assets referred to in sub-section (1) of an undertaking engaged in
generation or generation and distribution of power, the deduction in respect of
depreciation shall be such percentage of its actual cost to the assessee, as may be
prescribed.
(3) (a) In case of any block of assets, deduction in respect of depreciation shall be
such percentage of its written down value, as may be prescribed;
(b) when any building, machinery, plant or furniture is partly, or not wholly and
exclusively, used for the purposes of the business or profession, the deduction under
clause (a) shall be restricted to the fair proportionate part thereof as determined by
the Assessing Officer, having regard to the usage of such building, machinery, plant
or furniture for the purposes of the business or profession;
(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.
(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 (2) and (3) 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.
(5) The aggregate deduction in respect of depreciation allowable to the predeces-
sor and successor in cases of succession under section 70(1)(zd) or (ze) or (zf), or
section 313, or to the amalgamating and the amalgamated company in the case of
amalgamation, or to the demerged and resulting company in the case of demerger,
as the case may be, for any tax year, shall not exceed the deduction calculated at the
prescribed rates under this section as if the succession, amalgamation or demerger
had not taken place, and such deduction shall be allowed on pro rata basis based
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In plain language
What Section 33 says in plain English
When you run a business or profession, the assets you buy — a factory building, machinery, computers, office furniture, delivery vans, patents — slowly wear out or lose value over time. Section 33 of the Income-tax Act, 2025 lets you claim this loss in value as a yearly tax deduction called "depreciation". It reduces your taxable business profit even though you did not spend that money again in the year. This section is the direct successor to the well-known Section 32 of the Income-tax Act, 1961 — the rules are substantially the same, only the section number and drafting have changed. Section 33 applies for the tax year 2026-27 onwards (effective 1 April 2026).
Who can claim depreciation
- Anyone earning income from "profits and gains of business or profession" — individuals, HUFs, firms, LLPs, companies and others.
- You must be the owner (wholly or partly) of the asset. Registered ownership is not always required — beneficial ownership and, in some cases, leasehold improvements also qualify.
- The asset must be "used wholly and exclusively for the purposes of the business or profession" during the year. If used partly for personal purposes, only the business proportion is allowed.
The key concepts you must understand
- Block of assets: Assets are not depreciated one by one. Similar assets carrying the same rate are pooled into a "block" (for example, all plant & machinery at 15%). Depreciation is charged on the whole block's written-down value.
- Written Down Value (WDV) method: Depreciation is charged on the reducing balance — opening WDV plus additions, minus assets sold, then the rate applied. It is not the straight-line method (except for notified power undertakings).
- Depreciation is mandatory: Even if you forget to claim it in your books, it is deemed to have been allowed. You cannot "save" it for a better year.
- Goodwill of a business is NOT depreciable — this is a firm exclusion carried into the 2025 Act. Land is also never depreciable.
Important conditions and limits
- The 180-day rule: If an asset is acquired AND put to use for less than 180 days in the year, only 50% of the normal depreciation is allowed that year. The balance is absorbed through the block in later years.
- Additional depreciation: A manufacturing business (or notified power business) buying new plant and machinery can claim an extra 20% of its actual cost in the year of purchase, over and above normal depreciation. If used for less than 180 days, only 10% is allowed now and the remaining 10% in the next year. Second-hand assets, office appliances, road transport vehicles and machinery installed in office/residence do not qualify.
- Power undertakings generating or generating-and-distributing power may claim depreciation at a prescribed percentage of actual cost (straight-line style), if they opt for it.
- Succession, amalgamation or demerger: In the year of business transfer, depreciation is split between the predecessor and successor on a pro-rata basis by number of days the assets were used by each.
Carry forward of unabsorbed depreciation
If your business profit is too small to absorb the full depreciation, the unabsorbed portion is not lost. It is carried forward and added to next year's depreciation, and can be set off against ANY head of income (except salary) with no time limit — one of the most valuable features for loss-making or start-up years.
How it interacts with other sections
Depreciation under Section 33 is claimed after arriving at business profit under the general computation rules, and works alongside the "actual cost" and "written down value" definitions in the Act. If you sell an entire block, you may trigger a short-term capital gain or "terminal" adjustment. Businesses opting for presumptive taxation are deemed to have already claimed depreciation. Under the new default tax regime, additional depreciation and certain incentives may not be available — always check the regime you have chosen.
💡 Example
Example 1 — Normal depreciation with the 180-day rule. Riya runs a garment factory. On 1 May 2026 she buys machinery for ₹10,00,000 (plant & machinery block, 15%). Because it is used for more than 180 days, she gets full depreciation: 15% × ₹10,00,000 = ₹1,50,000. As a manufacturer buying new plant, she also claims additional depreciation of 20% × ₹10,00,000 = ₹2,00,000. Total first-year deduction = ₹3,50,000. Next year's opening WDV becomes ₹10,00,000 − ₹3,50,000 = ₹6,50,000, and normal depreciation of 15% applies to that.
Example 2 — Asset used for less than 180 days. Suppose Riya instead bought the same ₹10,00,000 machine on 1 January 2027 and used it for only about 90 days. Now only 50% of normal depreciation is allowed: 7.5% × ₹10,00,000 = ₹75,000. Additional depreciation is also halved to 10% = ₹1,00,000, with the remaining 10% (₹1,00,000) allowed in the next year.
A relatable story. Arjun, a young CA who just started his own practice, bought a laptop and printer for ₹1,20,000 (computers block, 40%). His first-year profit was almost nil, so his ₹48,000 depreciation could not be fully used. He worried it was wasted. His mentor explained Section 33's carry-forward rule: unabsorbed depreciation never expires and can offset future income across most heads. Two years later, when his practice was profitable, that carried-forward depreciation quietly reduced his tax bill — proving that in the early lean years, depreciation is money you get to keep for later.
| Block of asset | Depreciation rate (WDV) | Notes |
|---|
| Residential building | 5% | Excludes land value |
| Other (commercial/factory) building | 10% | Non-residential |
| Temporary / purely temporary structures | 40% | e.g. wooden site sheds |
| Furniture & fittings | 10% | Includes electrical fittings |
| Plant & machinery (general) | 15% | Most machinery, motor cars |
| Ships | 20% | — |
| Computers & software | 40% | Higher rate for IT assets |
| Intangible assets (patents, trademarks, licences, copyrights) | 25% | Goodwill NOT eligible |
| Additional depreciation (new plant in manufacturing) | 20% (extra, one-time) | 10% if used <180 days |
Related sections
Section 32 (1961 Act) — Depreciation (predecessor provision) Section 34 — Investment/expenditure-linked deductions (business) Section 26 — Deductions allowed while computing business income Section 45 — Capital gains on transfer of block of assets Section 58 — Meaning of 'actual cost' of assets Section 61 — Written down value (WDV) computation
Frequently asked questions
Is Section 33 of the 2025 Act the same as Section 32 of the old Act?
Yes. Section 33 of the Income-tax Act, 2025 is the re-numbered successor to Section 32 of the Income-tax Act, 1961. The core mechanics — block of assets, WDV method, rates and carry-forward — remain substantially unchanged.
Can I claim depreciation on goodwill?
No. Goodwill of a business or profession is specifically excluded from depreciable assets. Only patents, trademarks, copyrights, licences and similar acquired intangible rights (not goodwill) qualify at 25%.
What is the 180-day rule?
If you acquire and put an asset to use for less than 180 days in the tax year, you can claim only 50% of the normal depreciation that year. The remaining value stays in the block and depreciates in future years.
What happens to depreciation if my business made a loss?
Depreciation that cannot be absorbed becomes 'unabsorbed depreciation'. It carries forward indefinitely with no time limit and can be set off against most heads of income (other than salary) in future years.
Do I have to claim depreciation, or is it optional?
It is mandatory. Even if you do not record it in your books, it is deemed to have been allowed, and your written-down value is reduced accordingly. You cannot defer it to a more profitable year.
What is additional depreciation and who gets it?
Manufacturing businesses (and notified power businesses) buying new plant and machinery get an extra one-time 20% of the asset's actual cost in the purchase year, over and above normal depreciation. It is reduced to 10% if the asset is used for less than 180 days.
Can I claim depreciation on an asset used partly for personal use?
Only the business-use proportion is allowed. For example, a car used 60% for business and 40% personally allows depreciation only on the 60% business portion.
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CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 04 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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