Depreciation Under New Act: Section 32 Mapped
- Section 32 split into Sections 34 to 38 under the Income Tax Act 2025. Rates and WDV method unchanged.
- Block of assets concept retained. Same buckets: buildings, machinery, furniture, intangibles, etc.
- Additional depreciation for manufacturing assets continues (20% in the year of installation).
- Computers and software still at 40% depreciation. Vehicles at 15%. Buildings at 10% (residential) or 5% (commercial).
Depreciation is one of the largest deductions for businesses. If you claim depreciation on buildings, machinery, computers, or vehicles, you need to know: Section 32 is now spread across Sections 34 to 38 under the Income Tax Act 2025. The depreciation rates and WDV method remain unchanged.
Section 32 to Sections 34-38: Complete Mapping
Depreciation Method: Written Down Value (WDV)
The WDV method continues under the new act. Each year, depreciation is calculated on the opening written down value of the block of assets, reduced by any assets sold during the year and increased by any assets purchased.
The concept of block of assets - grouping similar assets into one block and applying a common depreciation rate - remains unchanged.
Depreciation Rates Under the New Act
The depreciation rates continue as before:
- Buildings (residential): 5%
- Buildings (non-residential): 10%
- Buildings (temporary structures): 40%
- Furniture and fittings: 10%
- Plant and machinery (general): 15%
- Plant and machinery (higher rate): 30% or 40% depending on the asset type
- Computers and software: 40%
- Motor vehicles: 15% (30% for vehicles used in hire business)
- Intangible assets (patents, copyrights, trademarks): 25%
If an asset is purchased and put to use for less than 180 days in the financial year, only 50% of the normal rate is allowed for that year.
Additional Depreciation for Manufacturing
Under Section 35 (old Section 32(1)(iia)), manufacturing businesses can claim additional depreciation of 20% on new plant and machinery (other than ships, aircraft, office appliances, and second-hand assets). This is available only in the first year of purchase.
If the asset is put to use for less than 180 days, the balance 10% additional depreciation can be claimed in the following year.
Written Down Value - Section 38 (Old 43(6))
The written down value (WDV) of a block of assets is calculated as:
- Opening WDV of the block
- Plus: actual cost of assets acquired during the year
- Minus: sale proceeds of assets sold during the year (capped at opening WDV + additions)
- Minus: depreciation for the year
If sale proceeds exceed the opening WDV plus additions, the excess is treated as short-term capital gain under the block of assets concept.
Unabsorbed Depreciation - Section 36 (Old 32(2))
If your total income is not sufficient to absorb the full depreciation, the unabsorbed amount can be carried forward indefinitely and set off against income of subsequent years. There is no time limit for carrying forward unabsorbed depreciation - unlike business losses which expire after 8 years.
Under Section 36 (old 32(2)), unabsorbed depreciation can be carried forward indefinitely. Unlike business losses, which expire after 8 years, depreciation losses age well. This is a planning lever in early-loss years for capital-intensive businesses.
Frequently Asked Questions
What is the new section number for depreciation?
Section 32 is now spread across Sections 34 to 38 under the Income Tax Act 2025. Section 34 covers the main depreciation allowance, Section 35 covers additional depreciation, and Section 38 covers the written down value calculation.
Have depreciation rates changed under the new act?
No. Depreciation rates remain the same: 15% for general plant and machinery, 40% for computers, 10% for furniture, 5% and 10% for buildings. The WDV method and block of assets concept also continue unchanged.
Can unabsorbed depreciation be carried forward indefinitely?
Yes. Under Section 36 (old Section 32(2)), unabsorbed depreciation can be carried forward without any time limit. It can be set off against income from any head in subsequent years.
What is additional depreciation and who can claim it?
Additional depreciation of 20% under Section 35 (old 32(1)(iia)) is available to manufacturing businesses on new plant and machinery. Available only in the first year. Does not apply to office appliances, second-hand assets, ships, or aircraft.
For the payment-basis deduction rules that pair with depreciation (PF, ESI, MSME, GST), see Section 43B now Section 55. For startup-specific carry-forward concessions, see startup tax benefits 2025.
Disclaimer: This article provides general information about the Income Tax Act 2025 and is not tax advice. Consult a qualified Chartered Accountant for advice specific to your situation.
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