Depreciation Rates For FY 2020-21: Depreciation is a tax deduction for the reduction in the real value of a tangible or intangible asset used by a taxpayer under the Income Tax Act. It is a must to calculate the depreciation of assets used or acquired in a profession or business. This is in accordance with the Income Tax Act of 1962, which specifies varying depreciation rates for various asset classes.
What is Depreciation?
Depreciation is the term used to describe the loss in the value of an asset over time. Taxpayers can claim depreciation on assets bought and used in their profession or business when calculating gains and income from their profession or business.
Depreciation On Block of Assets
The written down method is used to evaluate the depreciation of block of assets. Block of assets are nothing but, collection of assets that belong to the same asset type. This block of assets are classified into two types and they are:
- Tangible Assets such as Building, Machinery, Plant, Furniture etc.,
- Intangible Assets such as patents, copyrights, licenses, trademarks and so on.
Depreciation Rates for Fixed Assets
The rate of depreciation for different classes of assets are tabulated below:
Asset Class | Asset Type |
Depreciation Rate
|
Building | Residential buildings not including boarding houses and hotels | 5% |
Building | Boarding houses and hotels | 10% |
Furniture | Any fittings/furniture including electrical fittings | 10% |
Plant and machinery | Motor cars excluding those used in a business of running them on hire | 15% |
Intangible assets | Franchise, trademark, patents, license, copyright, know-how or other commercial or business rights of similar nature | 25% |
Plant and machinery | Lorries/taxis/motor buses used in a business of running them on hire | 30% |
Plant and machinery | Computers and computer software | 60% |
Plant and machinery | Books owned by assessee carrying on a profession not being annual publications | 60% |
Building | Purely temporary constructions like wooden structures | 100% |
Plant and machinery | Books owned by assessee carrying on a profession being annual publications | 100% |
Plant and machinery | Books owned by assessee carrying on business in running lending libraries | 100% |
Depreciation Rates As Per Income Tax Act
The depreciation rates as per the income tax act for both Part A & Part B tangible assets are given below:
Depreciation Rate for Tangible Asset Class Building
Sl.No | Asset Class – Building Asset Type |
Depreciation Rate
|
1 | Buildings used primarily for residential reasons (excluding boarding houses and hotels) | 5% |
2 | Buildings apart from those used primarily for residential reasons and not covered by sub-items 1 (above) and 3 (below) | 100.00% |
3 | Buildings procured on or after September 1, 2002, for installing plant and machinery forming part of water treatment system or water supply project and which is used for the purpose of the business of providing infrastructure facilities under clause (i) of subsection (4) of section 80-IA | 100.00% |
4 | Purely temporary erections like wooden structures | 100.00% |
Depreciation Rates for Asset Class Furniture and Fittings
Sl.No | Asset Class -Furniture and Fittings Asset Type |
Depreciation Rate
|
1 | Furniture and fittings including electrical fittings | 10.00% |
Depreciation Rate Chart for Asset Class Plant and Machinery
Sl.No | Asset Class – Plant and Machinery Asset Type |
Depreciation Rate
|
1 | Plant and machinery excluding those covered by sub-items (2), (3) and (8) below | 15.00% |
2 | Motor cars, excluding those used in a business of running them on hire, procured or put to use on or after April 1, 1990 | 15.00% |
3(i) | Airplanes, Aero Engines | 40.00% |
3(ii) | Motor taxis, motor buses and motor lorries used in a business of running them on hire | 30.00% |
3(iii) | A commercial vehicle which is procured by the assessee on or after October 1, 1998, but before April 1, 1999, and is used for any period of time prior to April 1, 1999, for the purpose of profession or business in agreement with the third proviso to clause (ii) of sub-section (1) of section 32 | 40.00% |
3(iv) | New commercial vehicle procured on or after October 1, 1998, but prior to April 1, 1999, in replacement of condemned vehicle of more than 15 years of age and is used for any period of time prior to April 1, 1999, for the purpose of profession or business in agreement with the third proviso to clause (ii) of sub-section (1) of section 32 | 60.00% |
3(v) | New commercial vehicle procured on or after April 1, 1999, but before April 1, 2000, in replacement of condemned vehicle of more than 15 years of age and is put to use prior to April 1, 2000, for the purposes of profession or business in agreement with the second proviso to clause (ii) of sub-section (1) of section 32 | 60.00% |
3(vi) | New commercial vehicle procured on or after April 1, 2001, but before April 1, 2002, and is put to use before April 1, 2002, for the purpose of profession or business | 50.00% |
3(vii) | Molds used in plastic and rubber goods factories | 30.00% |
3(viii) | Air pollution control equipment Felt
|
100.00% |
3(ix) | Water pollution control equipment Aerated detritus chambers (including air compressor)
|
30.00% |
3(x) | (a) Solid waste, control equipment Cryolite / mineral / lime / caustic / chrome recovery system (b) Resource recovery and solid waste recycling systems |
100.00% |
3(xi) | Plant and machinery used in semi-conductor industry covering all integrated circuits (ICs) (not including hybrid integrated circuits) ranging from small scale integration (SSI) to large scale integration / very large scale integration (LSI/VLSI) as also discrete semiconductor devices like diodes, triacs, thyristors, transistors, etc., except those covered by entries (viii), (ix), (x) of this sub-item and sub-item (8) below | 30.00% |
3(xi)a | Life-Saving medical equipment D.C Defibrillators for pacemakers and internal use
|
40.00% |
4 | Containers made of plastic or glass used as refills | 50.00% |
5 | Computers including computer software | 60.00% |
6 | Plant and machinery, used in processing, weaving and garment sector of the textile industry, which is bought under TUFS on or after April 1, 2001, but prior to April 1, 2004, and is put to use prior to April 1, 2004 | 50.00% |
7 | Plant and machinery procured and installed on or after September 1, 2002, in a water treatment system or a water supply project and put to use for the purpose of the business of providing infrastructure facility under clause (i) of sub-section (4) of section 80-IA | 100.00% |
8 | 1. Wooden parts used in artificial silk manufacturing machinery | 100.00% |
2. Match factories, wooden match frames | ||
3. Cinematograph films, bulbs of studio lights | 100.00% | |
4. Saltworks, condensers, reservoirs, salt pans, etc., made of clayey, sandy or earthy material or any other similar material | 100.00% | |
5. Quarries and mines | 100.00% | |
Sand stowing pipes, winding ropes, tubs and haulage ropes
|
||
Safety lamps | ||
6. Flour mills, rollers | ||
7. Sugar works, rollers | 80.00% | |
8. Steel and iron industry, rolling mill rolls | 80.00% | |
9. Energy-saving devices | 80.00% | |
(A) Furnaces and specialised boilers | ||
(i) Fluidized bed boilers / ignifluid | 80.00% | |
(ii) Continuous pusher type furnaces and flameless furnaces
|
||
(iii) High efficiency boilers | ||
(iv) Fluidized bed type heat treatment | ||
(B) Instrumentation and monitoring system for monitoring energy flows | 80.00% | |
(i) Digital heat loss meters | ||
(ii) Automatic electrical load monitoring systems
|
||
(iii) Infrared thermography | ||
(iv) Microprocessor based control systems | ||
(v) Meters for measuring heat losses, steam flow, furnace oil flow, power factor and electric energy meters
|
||
(vi) Exhaust gas analysers | ||
(vii) Maximum demand indicator and clamp-on power meters
|
||
(viii) Fuel oil pump test bench | ||
(C) Waste heat recovery equipment | 80.00% | |
(i) Air pre-heaters and recuperators | ||
(ii) Feedwater heaters and economizers | ||
(iii) Thermal energy wheel for low and high-temperature heat recovery
|
||
(iv) Heat pumps | ||
(D) Co-generation systems | 80.00% | |
(i) Controlled extraction, back pressure pass out, extraction cum condensing turbines for cogeneration along with pressure boilers
|
||
(ii) Organic Rankine cycle power systems | ||
(iii) Vapour absorption refrigeration systems | ||
(iv) Low inlet pressure small steam turbines | ||
(E) Electrical equipment | 80.00% | |
(i) Synchronous condenser systems and shunt capacitors
|
||
(ii) Relays (automatic power cut off devices) | ||
(iii) Power factor controller for AC motors | ||
(iv) Automatic voltage controller | ||
(v) Solid state devices for controlling motor speeds
|
||
(vi) FACT (Flexible AC Transmission) devices, Thyristor controlled series compensation equipment
|
||
(vii) Thermally energy-efficient stenters | ||
(viii) Series compensation equipment | ||
(ix) TOD (Time of Day) energy meters | ||
(x) Intelligent electronic devices/remote terminal units, computer software/hardware, bridges/router, other required equipment and associated communication systems for data acquisition systems and supervisory control, distribution management systems and energy management systems for power transmission systems
|
||
(xi) Special energy meters for ABT (Availability Based Tariff)
|
||
(F) Burners | 80.00% | |
(i) Zero to ten percent excess air burners | ||
(ii) Burners using air with high preheat temperature (above 300 degrees Celsius)
|
||
(iii) Emulsion burners | ||
(G) Other equipment | 80.00% | |
(i) Mechanical vapour recompression | ||
(ii) Wet air oxidation equipment for recovery of heat and chemicals
|
||
(iii) Automatic microprocessor-based load demand controllers
|
||
(iv) Thin film evaporators | ||
(v) Fluid couplings and fluid drives | ||
(vi) Coal based producer gas plants | ||
(vii) Super-charges/turbo charges | ||
(viii) Sealed radiation sources for radiation processing plants
|
||
10. Gas cylinders including regulators and valves | 60.00% | |
11. Glass manufacturing concerns, Direct fire glass melting furnaces | 60.00% | |
12. Mineral oil concerns | 60.00% | |
(i) Plant used in field operations (above ground) distribution, returnable packages
|
||
(ii) Plant used in field operations (below ground), but not including kerbside pumps including fittings and tanks used in field operations (distribution) by mineral oil concerns
|
||
13. Renewable energy devices | 60.00% | |
(i) Pipe type and concentrating solar collectors | ||
(ii) Flat plate solar collectors | ||
(iii) Solar cookers | ||
(iv) Air/fluid/gas heating systems | ||
(v) Solar water heaters and systems | ||
(vi) Solar crop drivers and systems | ||
(vii) Solar steels and desalination systems | ||
(viii) Solar refrigeration, air conditioning systems and cold storages
|
||
(ix) Solar pumps based on solar-photovoltaic and solar-thermal conversion
|
||
(x) Solar power generating systems | ||
(xi) Solar-photovoltaic panels and modules for water pumping and other applications
|
||
14. Windmills and any other specially designed devices that operate on windmills (installed on or after April 1, 2014) | 80.00% | |
15. Any special devices including electric pumps and generators operating on wind energy (installed on or after April 1, 2014) | 80.00% | |
16. Books owned by assessees carrying on a profession
|
||
(i) Books, being annual publications | 100.00% | |
(ii) Books, excluding those covered by entry (i) above | 60.00% | |
(iii) Books owned by assessees carrying on business in running lending libraries | 100.00% |
Depreciation Rates for Asset Class Ships
Sl.No | Asset Class – Ships Asset Type |
Depreciation Rate
|
4(i) |
Ocean-going ships including tugs, survey launches, dredgers, barges and other similar ships used primarily for dredging purposes and sighing vessels with a wooden hull
|
|
4(ii) | Vessels ordinarily operating on inland waters, not covered by sub-item (iii) below | 20.00% |
4 (iii) | Vessels ordinarily operating on inland waters being speed boats | 20.00% |
Now that we are aware of Depreciation rates as per companies act for Part A tangible assets. Now let’s look at the rate of depreciation rates for Part B intangible assets.
Depreciation Rates for Intangible Assets (Part B)
The asset type such as patents, know-how, trademarks, franchises, copyrights, licenses or any other commercial or business right of similar nature will have a rate of depreciation at 25%.
Who Can Claim Depreciation?
Individuals meeting the following criteria will be eligible to claim the depreciation.
- The assessee must own the assets in full or in part.
- The assets must be used in the taxpayer’s business or profession. If the assets are utilised for other reasons in addition to the business, the depreciation allowed will be proportionate to the use of the business purpose.
- Depreciation can be claimed by co-owners up to the value of the assets owned by each co-owner.
FAQ’s on Depreciation Rate
Question 1.
Can I claim depreciation on the cost of land?
Answer:
No, you cannot claim depreciation on the cost of land.
Question 2.
What is the depreciation rate on the computer as per the income tax act?
Answer:
As per the income tax act, the depreciation rate on computers is 40%.
Question 3.
Which is the depreciation rate formula?
Answer:
We can use the Straight-line method or the Written down method to calculate the depreciation rate. The straight-line methods formula which is used to calculate the rate of depreciation is (Cost of Asset – Salvage value of Asset)/ Depreciation Rate per Year.