Depreciation Rate As Per Income Tax Act

Depreciation Rate As Per Income Tax Act On Fixed Assets for FY 2020-21

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:

  1. Tangible Assets such as Building, Machinery, Plant, Furniture etc.,
  2. 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

  • filter system
  • Electrostatic precipitation systems
  • Scrubber
  • counter current / packedbed / venture / cyclonic scrubbers
  • Dust collector systems
  • Evacuation system and ash handling system
100.00%
3(ix) Water pollution control equipment Aerated detritus chambers (including air compressor)

  • Mechanical screen systems
  • Mechanically skimmed grease and oil removal systems
  • Flash mixing equipment and chemical feed systems
  • Mechanical reactors and mechanical flocculation
  • Mechanically aerated activated sludge / diffused air systems
  • Biofilters
  • Aerated lagoon systems
  • Air floatation systems
  • Methane
  • recovery anaerobic digester systems
  • Steam/air stripping systems
  • Marine outfall systems
  • Urea Hydrolysis systems
  • Activated carbon column
  • Bio
  • disc or rotating biological contractor
  • Marine outfall systems
  • Ion exchange resin column
  • Centrifuge for dewatering sludge
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

  • Colour Doppler
  • Haemodialysis
  • Cobalt therapy unit
  • Vascular Angiography System including Digital subtraction Angiography
  • Heart-lung machine
  • Spect Gamma Camera
  • Magnetic Resonance Imaging System
  • Ventilator used with anesthesia apparatus
  • Ventilator except those used with anesthesia
  • Surgical laser
  • Gamma knife
  • Fibreoptic endoscopes including audit resectoscope/pediatric resectoscope, arthroscope, peritoneoscopes, fibreoptic flexible nasal pharyngo, micro laryngoscope, video laryngo, fiberoptic flexible laryngo bronchoscope.
  • Bronchoscope, video oescophago gastroscope, video oescopghago bronchoscope, fibreoptic flexible oesophago gastroscope
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.

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