Section 33 — Depreciation | ITA 2025

Section 33 — DEDUCTION FOR DEPRECIATION

Section 33 is the depreciation provision — the most-litigated computational rule in PGBP. It extends to four asset classes: buildings, plant, machinery, and furniture (tangible); plus intangible assets (know-how, patents, trademarks) acquired post 1-4-1998. The rates are prescribed by rule 25 of the Income-tax Rules, 2026 read with Appendix I (rule 5 of the Income-tax Rules, 1962 under the 1961 Act). Additional depreciation @ 20% for new manufacturing plant & machinery is preserved.

Statutory text — Income-tax Act, 2025

Marginal note — Deduction for depreciation

(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 on number of days for which assets were used by the following:—

(a) predecessor and successor, in case of such succession; 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.

(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 of the assessee, 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.

(7) The provisions of this section shall apply whether or not the assessee has claimed deduction for depreciation in computing his total income.

(8) In addition to deduction under sub-section (3), additional deduction in respect of depreciation for any new machinery or plant 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 the 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 (not being a ship or an aircraft)—

(i) was not used either within or outside India by any other person before its installation by the assessee;

(ii) is not installed in any office premises or any residential accommo- dation, including accommodation in the nature of a guest house;

(iii) is not in the nature of any office appliances or road transport vehicle; or

(iv) is not an asset on which the whole of the actual cost is allowed as a deduction (whether by way of depreciation or otherwise) in com- puting the income under the head “Profits and gains of business or profession” of any tax year.

(9) The additional deduction in respect of depreciation 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, subject to the provisions of clause (b); 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 10% of the actual cost shall be allowed in the immediately succeeding tax year.

(10) The difference between the written down value and the moneys payable including the scrap value, if any, for any tangible asset in respect of which depreciation is claimed and allowed under sub-section (2), shall be allowed as deduction when—

(a) such asset 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 moneys 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.

(11) (a) Where the profits and gains chargeable for the tax year before allowing the deduction under sub-sections (1) to (10) is less than such allowable deduction, then—

(i) if such profits and gains is not a loss, the deduction under sub-sections

(1) to (10) 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-sections (1) to (10) shall be allowed;

(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; and

(c) the provisions of this sub-section shall be subject to the provisions of sections 112(3) and 113(4).

(12) For the purposes of this section,—

(a) “assets” mean—

(i) tangible assets, being buildings, machinery, plant or furniture;

(ii) intangible assets being—

(A) know-how; or

(B) patents; or

(C) copyrights; or

(D) trademarks; or

(E) licences; or

(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 (10 of 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)(c). General conditions for allowable deductions.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 — s. 33	INCOME-TAX ACT, 1961 — s. 32
Depreciation on tangible assets — building / plant / machinery / furniture	1961 s. 32(1)(i) — same
Depreciation on intangible assets (know-how / patents / trademarks etc.) acquired post 1-4-1998	1961 s. 32(1)(ii) — preserved
Block of assets concept — WDV method	1961 s. 32 read with s. 43(6) — same
Additional depreciation @ 20% for new manufacturing P&M	1961 s. 32(1)(iia) — preserved
Explanation 1 — 'plant' includes ships/vehicles/scientific apparatus/surgical equipment/books; EXCLUDES buildings, furniture, livestock, tea bushes	1961 Explanation to s. 43(3) (FA 2003 retrospective from 1-4-1961) — preserved
50% rate for assets used < 180 days	Same — preserved
Power generation — straight-line rates on actual cost in Appendix II, with an option for written-down value under Appendix I (rule 25(3) of the Income-tax Rules, 2026 and (5))	1961 s. 32(1)(i) read with rule 5(1A) of the Income-tax Rules, 1962 (Appendix IA) — preserved

STATUTORY ARCHITECTURE

Section 33 establishes the WDV (written-down value) method as the default depreciation methodology, with the block-of-assets concept (FA 1986) governing computation. Each asset class with same depreciation rate forms a 'block'; additions / sales adjust the block's WDV, and depreciation is charged on the block-WDV at the prescribed rate. Power-generating undertakings referred to in s.33(2) are allowed depreciation on actual cost at the straight-line percentages in Appendix II to the Income-tax Rules, 2026 (rule 25(3)), capped at the actual cost (rule 25(4)). They may instead opt for written-down-value depreciation under rule 25(1) and Appendix I, by the due date of the return under s.263(1)(c) for the tax year in which generation begins (rule 25(5)); the option, once exercised, is final for all later tax years (rule 25(6)). Under the 1962 Rules the corresponding tables were Appendix IA and Appendix I (rule 5(1A) of the Income-tax Rules, 1962).

STATUTORY ARCHITECTURE — Depreciation Rates (rule 25 and Appendix I of the Income-tax Rules, 2026)

Buildings: 5 per cent (used mainly for residential purposes, except hotels and boarding houses); 10 per cent (other buildings); 40 per cent (buildings for machinery and plant of a water supply project or water treatment system used in an infrastructure business under s.80-IA(4)(i) of the Income-tax Act, 1961); 40 per cent (purely temporary erections such as wooden structures). Furniture and fittings, including electrical fittings: 10 per cent. Machinery and plant: 15 per cent (general rate, and motor cars not used in a business of running them on hire; 30 per cent for such cars acquired between 23-8-2019 and 31-3-2020 and put to use before 1-4-2020); 30 per cent (motor buses, lorries and taxis used in a business of running them on hire, 45 per cent if acquired and put to use in that window; moulds in rubber and plastic goods factories; semiconductor machinery and plant); 40 per cent (aeroplanes and aero-engines, computers including software, air and water pollution control and solid waste equipment, life-saving medical equipment, energy-saving devices, renewable energy devices, books, and the other listed items); 15 per cent (oil wells not elsewhere covered). No rate in Appendix I exceeds 45 per cent. Ships, including inland vessels and speed boats: 20 per cent. Intangible assets (know-how, patents, copyrights, trademarks, licences, franchises and similar rights): 25 per cent. Rule 25(2) caps depreciation on any block at 40 per cent of written down value for a domestic company that has opted under s.199(3), 200(5) or 201(2), an individual, HUF, AOP, BOI or artificial juridical person taxed under s.202(1), and a resident co-operative society that has opted under s.203(5) or 204(2).

JUDICIAL EVOLUTION — Functional Test for 'Plant' (Taj Mahal Hotel)

The leading authority is CIT v. Taj Mahal Hotel, (1971) 82 ITR 44 (SC), where the Supreme Court ruled that 'plant' has a wide meaning and includes any apparatus used by a businessman for carrying on his business — including sanitary fittings in a hotel.

HELD: The word 'plant' in its ordinary sense includes whatever apparatus is used by a businessman for carrying on his business. Sanitary and pipeline fittings in a hotel are 'plant' as they constitute the apparatus through which the hotel-keeper renders services. (per Taj Mahal Hotel ¶ 6).

JUDICIAL EVOLUTION — Building Exclusion (Anand Theatres + Karnataka Power)

CIT v. Anand Theatres, (2000) 244 ITR 192 (SC) — cinema / hotel building IS NOT plant for depreciation, however specially designed. The premises is the SITUS, not the apparatus. FA 2003 codified the building exclusion in Explanation 1 to s. 43(3) (now s. 33 Explanation) with retrospective effect from 1-4-1961.

CIT v. Karnataka Power Corporation Ltd., (2001) 247 ITR 268 (SC) — READ DOWN of Anand Theatres — generating-station building functionally integrated with apparatus may still qualify as plant. Functional test is determinative for sector-specific apparatus-buildings.

JUDICIAL EVOLUTION — Intangible Assets (Scientific Engineering)

Scientific Engineering House (P.) Ltd. v. CIT, (1986) 157 ITR 86 (SC) — drawings, designs, charts, plans (know-how) are 'plant' for depreciation. Foundation for the post-FA-1998 intangible-asset depreciation regime under s. 32(1)(ii) [now s. 33].

JUDICIAL EVOLUTION — Goodwill (Smifs Securities — Pre-FA 2021)

CIT v. Smifs Securities Ltd., (2012) 348 ITR 302 (SC) — goodwill arising on amalgamation IS depreciable as 'any other business or commercial right of similar nature'. FA 2021 reversed this position by adding 'goodwill' as a specified excluded item from the intangible-asset depreciation regime; goodwill no longer depreciable from AY 2021-22 onwards.

JUDICIAL EVOLUTION — Slump-Sale Goodwill Cost (Hindustan Coca-Cola)

For pre-FA 2021 amalgamations and slump sales, goodwill cost determination follows the SC ratio in slump-sale jurisprudence — cost is the consideration allocated to goodwill in the scheme. Post-FA 2021, even slump-sale goodwill is non-depreciable.

DEPARTMENTAL PRACTICE

Rule 25 of the Income-tax Rules, 2026 and Appendix I — depreciation rates by block of assets (rule 5 of the Income-tax Rules, 1962 under the 1961 Act). Rule 25(3) and (5) — power-generating undertakings: straight-line rates in Appendix II, with an option for written-down value under Appendix I. Particulars of depreciation are reported in the tax audit report under rule 47 of the Income-tax Rules, 2026 (audit report in Part A or Part B of Form No. 26; particulars in Parts C and D), formerly clause 18 of Form No. 3CD under rule 6G of the Income-tax Rules, 1962. Block-of-assets reconciliation in Schedule DEP of ITR-3/5/6 — opening WDV → additions → disposals → closing WDV → depreciation charge.

PLANNING NOTES & LITIGATION DEFENCE

(i) For specialised industrial structures (cold storage, gas-storage tank, telecom tower, wind-turbine foundation), evaluate Karnataka Power-type plant claim with engineering certificate. (ii) For hotel / cinema / hospital buildings, accept building-rate depreciation — Anand Theatres forecloses plant classification. (iii) For lift, escalator, electrical fittings, plumbing — these are 'plant' attached to a building, depreciable at plant rate (10%-15%) if separately invoiced and identified. (iv) Maintain detailed asset master with engineering certification of plant character — critical for s. 167/168 scrutiny defence. (v) For amalgamation / slump-sale post-FA 2021, do NOT claim goodwill depreciation; route any 'know-how' or 'distribution network' separately under intangible-asset class. (vi) For 50%-rate assets (used < 180 days), verify date of put-to-use; cite circumstantial evidence (commissioning report, employment of personnel, electricity connection).

CROSS-REFERENCES

Section 26 — PGBP charge.
Section 41 — Written down value of depreciable asset.
Section 39 — Computation of actual cost.
Section 67 — Capital gains charge (depreciable asset transfer routes through s. 50).
Rule 25 of the Income-tax Rules, 2026 and Appendices I and II — depreciation rates (formerly rule 5 of the Income-tax Rules, 1962).
Rule 47 of the Income-tax Rules, 2026 — tax audit report under s.63 in Form No. 26 (formerly Forms No. 3CA/3CB and 3CD under rule 6G of the Income-tax Rules, 1962).

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