Current Depreciation Rates As Per Income Tax Act and Companies Act Financial Year 2020-21

Current Depreciation Rates as per Income Tax Act and Companies Act

Depreciation On Assets:-

In case of ownership:-

It is covered under section 32 of the Income tax act. In order to claim depreciation the asset should be used for business or profession and assesse should be owner of such asset. Depreciation on asset is allowed only if assesse is beneficial owner.

In case of lease:-

In this case, depreciation is always claimed by lessor whether it is financial lease or operating lease.

In case of hire purchase:-

In this, assesse gets the ownership only after payment of last installment but he can claim depreciation from start, assuming assesse is the owner from start.

Depreciation on asset partially owned by the assesse:-

It shall be allowed to him to the extent of his share in asset.

Depreciation on stand by machinery and emergency spares:-

the depreciation shall be allowed even if they are ready for use and not to put use.

Depreciation Rates on Assets under Income Tax Act

Rates of Depreciation as per Income Tax Act:-

Block of Assets	Asset Description	Depreciation Rate (%)
1. Buildings	(1) Residential buildings (excluding hotels and boarding houses)	5
	(2) Other buildings (non-residential)	10
	(3) Buildings acquired on or after 1 Sept 2002 for water supply/water treatment infrastructure	40
	(4) Purely temporary erections such as wooden structures	40
2. Furniture and Fittings	Furniture and fittings including electrical fittings	10
3. Machinery and Plant	(1) General machinery and plant (excluding special categories)	15
	(2) Motor cars (not used for hire), standard acquisition	15
	Special motor cars acquired between 23 Aug 2019 and 1 Apr 2020 (used before 1 Apr 2020)	30
	(3) Airplanes and aero engines	40
	(3) Motor buses, lorries, taxis used for hire	30
	Special hire vehicles acquired between 23 Aug 2019 and 1 Apr 2020 (used before 1 Apr 2020)	45
	(3) Commercial vehicles with special acquisition periods	40
	(7) Machinery for water supply or treatment projects (post 1 Sept 2002)	40
	(8) Wooden parts in artificial silk machinery, match sticks, salt pans, rollers etc.	40
	(8) Energy saving devices, boilers, instrumentation, heat recovery, co-generation systems, burners	40
	(8) Gas cylinders including valves and regulators	40
	(8) Glass manufacturing – direct fire furnaces	40
	(8) Mineral oil industry – Field operation plant (below ground)	40
	(8) Oil wells not covered elsewhere (from AY 2016-17)	15
	(9) Semiconductor industry machinery (excluding hybrid circuits)	30
	(10) Life-saving medical equipment (including defibrillators, MRI, ventilators, lasers, etc.)	40
	(4) Containers made of glass or plastic used as refills	40
	(5) Computers including computer software	40
	(6) Machinery under Technology Upgradation Fund Scheme (TUFS) for weaving/processing sector (2001-2004)	40
	(11) Renewable energy devices like solar collectors, windmills, biogas plants	40
4. Ships	Ocean-going ships, dredgers, tugs, barges, fishing vessels with wooden hull	20
4. Ships	Vessels operating on inland waters including speed boats	20

Notes on Depreciation Rates as per Income Tax Act:

“Buildings” include roads, bridges, culverts, wells, and tubewells.
A building is considered mainly for residential purposes if at least 66⅔% of its built-up floor area is used for residential purposes, including buildings within factory premises.
For renovation or improvements related to buildings, depreciation rates applicable to the class of building (residential or non-residential) are applied accordingly. Extensions are treated as separate buildings for depreciation purposes.
Water treatment systems include desalination, demineralization, and purification systems.
“Electrical fittings” cover electrical wiring, switches, sockets, fans, and similar fittings.
Rate of depreciation is 40% if conditions of Rule 5(2) of the Income Tax Rules are met.
The 40% depreciation for certain medical equipment applies from Assessment Year 2004-05.
“Commercial vehicle” means specific categories such as heavy goods and passenger vehicles but excludes maxi-cabs, motor-cabs, tractors, and road-rollers, as defined in the Motor Vehicles Act, 1988.
“Computer software” refers to any program recorded on discs, tapes, or other storage devices.
“TUFS” stands for Technology Upgradation Fund Scheme, a government initiative for textile sector modernization.
Machinery and plant include pipes necessary for water delivery from source to plant and storage.
“Speed boat” means a motorboat driven by a high-speed internal combustion engine, capable of exceeding 24 km/h and designed to plane at speed.

Depreciation Rates as per Companies Act

Below the various rates of depreciation as per Companies Act:

Nature of Asset	Useful Life (Years)	Rate (SLM)	Rate (WDV)
Buildings [NESD]
- Building (non-factory) RCC Frame Structure	60	1.58%	4.87%
- Building (non-factory) other than RCC	30	3.17%	9.50%
- Factory buildings	30	3.17%	9.50%
- Fences, wells, tube wells	5	19.00%	45.07%
- Other buildings (including temporary structure)	3	31.67%	63.16%
Bridges, culverts, bunkers, etc. [NESD]	30	3.17%	9.50%
Roads [NESD]
- Carpeted Roads (RCC)	10	9.50%	25.89%
- Carpeted Roads (non-RCC)	5	19.00%	45.07%
- Non-carpeted roads	3	31.67%	63.16%
Plant and Machinery
- General Plant & Machinery	15	6.33%	18.10%
- Continuous process plant (if no special rate)	25	3.80%	11.29%
- Motion picture film related machinery	13	7.31%	20.58%
- Glass industry machinery (except direct fire furnaces)	13	7.31%	20.58%
- Mines and quarries machinery	8	11.88%	31.23%
- Telecommunications equipment	Varies (13-18)	5.28%-7.31%	15.33%-20.58%
- Oil and gas assets (refineries, pipelines etc)	25-30	3.17%-3.80%	9.50%-11.29%
- Power generation equipment (thermal, hydro, nuclear)	40	2.38%	7.22%
- Wind power generation	22	4.32%	12.73%
- Electric & gas distribution plants	30-35	2.71%-3.17%	8.20%-9.50%
- Steel plant machinery (sinter, blast furnace etc.)	20-25	3.80%-4.75%	11.29%-13.91%
- Non-ferrous metals machinery	30-40	2.38%-3.17%	7.22%-9.50%
- Medical and surgical equipment	13-15	6.33%-7.31%	18.10%-20.58%
- Pharmaceutical and chemical plant machinery	20	4.75%	13.91%
- Civil construction equipment	9-20	4.75%-10.56%	13.91%-28.31%
- Salt works machinery	15	6.33%	18.10%
Furniture and fittings
- General furniture and fittings	10	9.50%	25.89%
- Furniture used in hotels, schools, theatres etc.	8	11.88%	31.23%
Motor Vehicles
- Motorcycles, scooters	10	9.50%	25.89%
- Vehicles on hire (buses, lorries, taxis)	6	15.83%	39.30%
- Vehicles not used for hire	8	11.88%	31.23%
- Motor tractors, heavy vehicles	8	11.88%	31.23%
- Electrically operated vehicles	8	11.88%	31.23%
Ships
- Ocean-going ships and bulk carriers	25	3.80%	11.29%
- Tankers and chemical carriers	20-25	3.80%-4.75%	11.29%-13.91%
- Liquefied gas carriers and passenger vessels	30	3.17%	9.50%
- Fishing vessels with wooden hull	10	9.50%	25.89%
Aircrafts and Helicopters	20	4.75%	13.91%
Railway sidings, locomotives, tramways	15	6.33%	18.10%
Ropeway structures	15	6.33%	18.10%
Office equipment	5	19.00%	45.07%
Computers and data processing units
- Servers and networks	6	15.83%	39.30%
- End user devices (desktops, laptops)	3	31.67%	63.16%
Laboratory equipment
- General laboratory equipment	10	9.50%	25.89%
- Laboratory equipment used in educational institutes	5	19.00%	NA

Notes:

NESD: Not specifically enumerated in Schedule II.
Companies Act allows depreciation using Straight Line Method (SLM) or Written Down Value (WDV).
Useful life is determined as per Schedule II of the Companies Act.
Land and leasehold land are not depreciable.
Rates vary based on asset's nature and usage.
This table summarizes prevalent asset classes with their corresponding depreciation useful life and rates as per Companies Act 2013, subject to the latest amendments.

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