Depreciation Guide FY 2024-25: Income Tax Rules Made Simple

A Straight-Talk Guide to Depreciation Under the Income Tax Act (FY 2024-25)

Let’s face it: when it comes to taxes, most of us want answers that actually make sense in the real world. So, if you’re a business owner, a professional, or just someone curious about how depreciation works under India’s Income Tax Act for 2024-25, let’s break it down together—no jargon, no robotic explanations, just the facts, straight up.

What’s Depreciation, Really?

Think of depreciation as the government’s way of letting you recover the cost of stuff you buy for your business—like machines, furniture, or even software—over time, instead of all at once. You get to deduct a bit each year, based on how long that asset is expected to last and how much it’s used for business.

Who Gets to Claim Depreciation?

Here’s the deal: you can claim depreciation if you actually own the asset (even if it’s through a hire purchase or a lease) and you’re using it for your business or profession. Even if you share ownership—say, in a partnership or joint venture—you can claim your share. Courts have made it clear: what matters is beneficial ownership, not just having your name on the paperwork.

One more thing: the asset doesn’t have to be running every single day. As long as it’s “put to use” during the year—even if it’s just on standby or backup—you’re good to go. So, if you’re keeping a spare machine just in case, you can still claim depreciation on it.

How Assets Are Grouped: The Block System

Instead of tracking each asset separately, the law groups similar assets into “blocks.” For example, all your furniture goes into one block, all your computers into another, and so on. This makes things simpler come tax time. But remember, land is never depreciated—it just doesn’t wear out like other stuff does.

Goodwill used to be depreciable, but not anymore. The latest amendments have officially kicked goodwill out of the list of depreciable assets.

Depreciation Rates You Need to Know (FY 2024-25)

Here’s a quick rundown of the standard rates:

Residential buildings: 5%
Non-residential buildings: 10%
Furniture and fittings: 10%
Computers and software: 40%
General plant and machinery: 15%
Ships: 20%
Aircraft: 40%
Intangible assets (like patents): 25%

Special Note on Motor Vehicles

A few years ago, there was a temporary hike in depreciation rates for motor vehicles bought between August 23, 2019, and March 31, 2020. If you bought a car for business in that window and put it to use before April 2020, you get the higher rate for its whole life. For everyone else, it’s back to the standard rates: 15% for cars, 30% for commercial vehicles.

Extra Depreciation: Who Gets It?

If you’re in manufacturing, production, or the electricity business, you might get an extra 20% depreciation on new plant and machinery. There are a few twists:

If you set up in certain “backward” areas of Andhra Pradesh, Bihar, Telangana, or West Bengal between April 2015 and March 2020, you could claim 35% instead of 20%—but only for new installations.
There’s a “180-day rule.” If you use the asset for at least 180 days in the year you buy it, you get the full extra depreciation. If not, you get half now and the rest next year.

How Do You Calculate Depreciation?

It’s all about the Written Down Value (WDV) method. Here’s how it works, step by step:

Start with the opening WDV (what your block was worth at the start of the year).
Add the cost of any new assets you bought.
Subtract what you got from selling or scrapping assets.
The result is your closing WDV, which is what you use to calculate depreciation for the year.

When figuring out the “actual cost” of an asset, include everything it took to get it ready for use—purchase price, taxes, installation, insurance, and so on. But if you got a subsidy or made money from a trial run, subtract that out.

And don’t forget: if you pay more than ₹10,000 in cash for an asset in a single day, you can’t claim depreciation on that payment. Use cheques, drafts, or online transfers to stay on the safe side.

GST and Depreciation: What’s the Catch?

If you claim GST input tax credit (ITC) on an asset, you calculate depreciation on the cost excluding GST. If you don’t claim ITC, you include GST in the asset’s cost. Some assets—like most motor vehicles—fall under “blocked credits,” so you can’t claim ITC and must include GST in the depreciation base.

A recent tweak to GST rules (from December 2024) clarifies the wording around “plant and machinery,” but it doesn’t change how you calculate depreciation in practice.

What’s New in the Law?

The Income Tax Bill 2025 is cleaning up the language around depreciation. The rules are being reorganized for clarity—fewer words, more structure—but the actual rates and eligibility aren’t changing. Definitions for “actual cost” and “WDV” are now in easy-to-read tables, and goodwill is officially out. The idea is to make things clearer and reduce confusion, not to change the bottom line.

Got a Dispute? There’s a Settlement Scheme

If you’re tangled up in a depreciation-related tax dispute, the Direct Tax Vivad Se Vishwas Scheme 2024 (effective October 2024) gives you a chance to settle for a reduced amount, depending on your situation and how quickly you act.