Depreciation Rates for FY 2025-26 Under Income Tax Act: Complete Practical Guide
A business asset is not just a purchase entry. It affects taxable profit, future written down value, advance tax, cash-flow planning and ITR reporting. This guide explains the depreciation rates, calculation logic, examples and compliance checkpoints Indian businesses should know before filing.
Depreciation Rates for FY 2025-26 Under Income Tax Act matter for every Indian business, professional practice, freelancer with business assets, firm, LLP and company that wants to compute taxable income correctly. When you buy a laptop, machinery, office furniture, commercial vehicle, software licence or business premises improvement, the full cost is usually not deducted as a normal revenue expense immediately. Instead, the Income Tax Act allows depreciation over time, at prescribed rates, based on the asset block and its use in business or profession.
This sounds simple until you begin preparing the tax computation. Is a laptop a computer or office equipment? Is software part of the computer block? Does a motor car used by the proprietor qualify at the same rate as taxis used in the business of running them on hire? Can depreciation be claimed if the asset was bought in February? What happens when an asset is sold from a block? Why is book depreciation different from income tax depreciation? These questions directly affect profit, tax payable, advance tax, cash flow, closing written down value and future-year deductions.
For FY 2025-26, the practical approach is to start with the law: depreciation under Section 32 is available for eligible assets owned by the taxpayer and used for business or profession, subject to the prescribed percentage on the written down value of the relevant block of assets. The official Income Tax Department reference for the rate table is Appendix I under Rule 5, and taxpayers should verify the latest rate table, form instructions and filing utility on the Income Tax e-Filing portal and the Income Tax Department website before filing.
This WealthSure guide is written for founders, MSME owners, freelancers, consultants, professionals, accountants, finance teams and taxpayers preparing business or professional ITRs. It explains the most used depreciation rates, the block-of-assets concept, the 180-day rule, examples, common mistakes and review checklist. Where your asset register, books of account, GST data, capital purchases and tax computation do not match cleanly, WealthSure can support you with business and professional ITR filing, personal tax planning and expert tax advisory.
What depreciation means under the Income Tax Act
Depreciation is a tax allowance for the gradual reduction in value or usage of a capital asset used in business or profession. A business may buy an asset today, but the asset usually supports income generation over multiple years. The tax law therefore allows a deduction through depreciation instead of treating every capital purchase as an immediate revenue expense.
Section 32 of the Income Tax Act is the core provision. It refers to depreciation in respect of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of business or profession. The section also recognises the block-of-assets system and points to prescribed rates. The official rate table appears under Rule 5 and Appendix I.
In practical terms, income tax depreciation answers four questions:
- Is the asset owned by the taxpayer?
- Is it used for business or profession?
- Which block of assets does it belong to?
- What rate applies to that block for the year?
This is different from book depreciation. Your accounting depreciation may follow Companies Act Schedule II, accounting standards, internal useful-life estimates or management policy. Income tax depreciation follows the Income Tax Act, Income Tax Rules and the prescribed block rates. Because of this, the depreciation amount in your profit and loss account may not match the depreciation allowed in your tax computation.
Important: Do not copy book depreciation blindly into the income tax return. For tax purposes, you usually need block-wise written down value, additions, deletions, put-to-use date, applicable rate and closing WDV.
Depreciation Rates for FY 2025-26 Under Income Tax Act: quick reference table
The table below summarises commonly used depreciation rates for FY 2025-26 under Income Tax Act for practical business filing. The official Appendix I is more detailed and includes specific categories, exclusions, notes and historical conditions. Use this table as a working guide, not as a substitute for professional review in complex cases.
| Block / Asset Category | Common Income Tax Depreciation Rate | Typical Use Case | Practical Filing Note |
|---|---|---|---|
| Buildings used mainly for residential purposes except hotels and boarding houses | 5% | Residential staff quarters or qualifying residential property used in business context | Check whether the building is mainly residential based on actual use. |
| Buildings other than mainly residential buildings | 10% | Office premises, shops, factories, warehouses and commercial buildings | Land is not depreciable. Split land and building cost where required. |
| Purely temporary erections and specified water project buildings | 40% | Temporary wooden structures or specified infrastructure-linked water project assets | Conditions matter. Avoid applying 40% to normal building improvements without review. |
| Furniture and fittings including electrical fittings | 10% | Office desks, chairs, cabinets, electrical fittings, wiring, switches and fans | Computers should generally not be grouped with furniture. |
| General machinery and plant | 15% | Most standard plant, machinery and equipment not covered by special rates | This is the default practical rate for many business machines, but classification must be checked. |
| Motor cars not used in business of running them on hire | 15% | Business cars used by owners, partners, directors or employees | Personal-use disallowance and documentation should be reviewed where relevant. |
| Motor buses, motor lorries and motor taxis used in a business of running them on hire | 30% | Transport, taxi, fleet or vehicle-hire businesses | Higher rate is linked to the nature of business use, not merely ownership of the vehicle. |
| Aeroplanes and aero engines | 40% | Aviation-related business assets | Documentation and industry-specific tax review are essential. |
| Computers including computer software | 40% | Laptops, desktops, servers and eligible computer software | Commonly relevant for freelancers, professionals, startups and IT businesses. |
| Books owned by professionals or lending libraries | 40% | Professional reference books, annual publications and library business books | Keep invoice and usage records, especially for professional claims. |
| Specified pollution control, renewable energy, energy-saving and life-saving medical equipment | 40% | Specific listed equipment under Appendix I | Only listed and eligible items should be claimed at the higher rate. |
| Ships | 20% | Ocean-going and inland water vessels covered by the table | Relevant mainly for specialised businesses. |
| Intangible assets: know-how, patents, copyrights, trademarks, licences, franchises or similar business rights | 25% | Brand rights, licences, IP rights, commercial rights and similar eligible intangibles | Eligibility and valuation should be documented carefully. |
The official Appendix I also contains notes explaining terms such as buildings, electrical fittings, computer software, commercial vehicle and certain special asset categories. When an asset is expensive, newly acquired, partly personal, imported, financed, sold during the year or used across multiple activities, it is safer to review the rate before finalising the return.
Need help classifying business assets correctly? WealthSure can review your asset register, invoices, books and depreciation schedule before ITR filing.
Ask a WealthSure tax expertLegal basis: Section 32, Rule 5 and Appendix I
The legal foundation for depreciation is not merely an accounting convention. Section 32 of the Income Tax Act allows depreciation on eligible assets owned and used for business or profession, subject to the prescribed rules. The prescribed rates are listed in Appendix I of the Income Tax Rules. Taxpayers can refer to the official law pages on the Income Tax Department portal for the statutory text and updates.
For FY 2025-26, the relevant previous year runs from 1 April 2025 to 31 March 2026. The corresponding assessment year is AY 2026-27. Depreciation claimed for FY 2025-26 will be reflected in the business or professional income computation for AY 2026-27, depending on the taxpayer type and applicable ITR form.
Business owners should also remember that tax depreciation is one part of the total compliance picture. The same asset may appear in accounting records, GST input tax credit records, loan documentation, insurance records and fixed asset registers. A mismatch between asset purchases, books and return schedules can create avoidable questions later.
The block of assets concept explained simply
Under the Income Tax Act, depreciation is generally calculated on a block of assets. A block is a group of assets falling within a class of assets for which the same rate of depreciation is prescribed. Instead of calculating depreciation separately on each individual asset forever, the law applies a rate to the written down value of the block.
For example, if a business has multiple laptops and desktops, they may form part of the computer block eligible at the applicable computer depreciation rate. If the business buys another eligible computer during the year, that cost is added to the block. If a computer is sold, the sale proceeds are reduced from the block, subject to tax rules. Depreciation is then computed on the remaining adjusted WDV, considering the 180-day rule where relevant.
Why the block system is important
The block system simplifies computation, but it also increases the importance of correct classification. If a business wrongly puts a computer into a 15% plant and machinery block instead of a 40% computer block, it may underclaim depreciation. If it wrongly puts general office equipment into the 40% computer block, it may overclaim depreciation and face correction risk.
The block concept also matters when an asset is sold. You do not always compute profit or loss on the sale of each depreciable asset in the same way as a normal capital asset. Instead, the block continues if assets remain in that block. If the block ceases or sale consideration exceeds the block value, tax consequences may arise. Such cases need careful review, especially for companies, LLPs, manufacturing units, clinics, real estate businesses and professional firms with large asset registers.
How depreciation is calculated under the WDV method
Income tax depreciation normally uses the written down value method. The broad calculation is:
Opening WDV of block + eligible additions during the year − sale proceeds of assets sold from the block = adjusted block value. The depreciation rate is then applied, subject to the 180-day rule for assets acquired and put to use for less than 180 days.
In practice, the schedule may require separate treatment for additions used for 180 days or more and additions used for less than 180 days. This is because the half-rate restriction applies only to assets acquired during the previous year and put to use for less than 180 days, not necessarily to the entire old block.
The 180-day rule
If an asset is acquired during FY 2025-26 and put to use for business or profession for less than 180 days in that year, the depreciation claim for that asset is generally restricted to 50% of the normal applicable rate for that year. For a 15% block, this means 7.5% for the first year. For a 40% block, this means 20% for the first year.
The phrase “put to use” is important. Buying an asset is not enough. The taxpayer should be able to show that the asset was ready and used for business or professional purposes. Invoice date, installation date, delivery date, payment record, usage logs, asset tagging, insurance, internal approval and business records may help support the claim.
Full-year and half-year depreciation example
Suppose a design agency buys a desktop computer for ₹1,20,000 on 10 May 2025 and puts it to use immediately. Since it is used for more than 180 days in FY 2025-26, the normal 40% computer depreciation rate may apply, subject to conditions. The depreciation would be ₹48,000 and closing WDV would be ₹72,000.
Now suppose the same computer is bought and put to use on 15 January 2026. Since it is used for less than 180 days during FY 2025-26, the first-year claim would generally be restricted to half of 40%, that is 20%. Depreciation would be ₹24,000 and closing WDV would be ₹96,000.
| Scenario | Asset Cost | Normal Rate | Use During FY 2025-26 | Allowed Rate in First Year | Depreciation |
|---|---|---|---|---|---|
| Computer bought in May 2025 | ₹1,20,000 | 40% | More than 180 days | 40% | ₹48,000 |
| Computer bought in January 2026 | ₹1,20,000 | 40% | Less than 180 days | 20% | ₹24,000 |
Practical examples and mini case studies
Depreciation errors usually happen in real-world filing situations, not in theory. The following examples show how different taxpayers should think about depreciation rates for FY 2025-26 under Income Tax Act.
Situation
A freelance video editor buys a laptop for ₹1,50,000 in July 2025 and an annual editing software licence for ₹42,000. The freelancer files business/professional income and uses the laptop primarily for client work.
Common confusion
The freelancer treats the laptop as a normal office asset at 15% because it is “equipment” and claims the full software subscription as a revenue expense without checking whether it is capital or subscription-based.
Correct approach
The laptop may fall under computers eligible at 40%, subject to ownership and business use. The software treatment depends on the nature of the licence, accounting treatment and whether it is a recurring subscription or capital software. The put-to-use date supports full-year depreciation because the laptop was used for more than 180 days.
How expert guidance helps
A tax expert can review invoices, usage, capitalisation policy and professional income schedules. WealthSure can help freelancers prepare accurate depreciation schedules while filing through ITR-3 business and professional income filing.
Situation
A small clinic purchases diagnostic equipment in December 2025 and begins using it in January 2026. The clinic also buys computers and furniture for the reception area.
Common confusion
The clinic applies 40% depreciation to all equipment because some medical equipment appears in higher-rate categories. It also forgets the 180-day rule because the invoices are dated before year-end.
Correct approach
Only specified life-saving medical equipment listed in Appendix I may qualify for the higher rate. Other medical or clinic equipment may fall under general plant and machinery unless specifically covered. Assets put to use for less than 180 days in FY 2025-26 may get only half the normal rate in the first year.
How expert guidance helps
Professional review helps classify each asset: computers, furniture, general plant, eligible special equipment and building improvements. This reduces overclaim risk and supports accurate advance tax and ITR computation.
Situation
A transport business buys two goods vehicles in April 2025 for commercial operations. The owner also buys a passenger car for business meetings and client visits.
Common confusion
The owner assumes every vehicle qualifies for the same higher vehicle depreciation rate because all vehicles are used in business.
Correct approach
Motor buses, motor lorries and motor taxis used in the business of running them on hire may qualify for a different rate from ordinary motor cars not used in such a hire business. A passenger car used for business meetings is not the same as a vehicle used in the business of running vehicles on hire. Personal-use disallowance may also need evaluation.
How expert guidance helps
An advisor can check registration documents, business model, invoices, loan records, logbooks and actual usage. For businesses with multiple assets and tax payments, WealthSure’s advance tax calculation support can help estimate tax impact during the year.
Situation
A startup sets up a new office in FY 2025-26. It buys laptops, desks, chairs, servers, electrical fittings and also acquires a trademark licence for a product line.
Common confusion
The finance team groups all setup expenses into one “office assets” account and applies one depreciation rate.
Correct approach
Different assets may belong to different blocks. Computers and software may be in the 40% block, furniture and electrical fittings in the 10% block, general equipment in the 15% block, and eligible intangible rights in the 25% block. Leasehold improvements need separate review depending on facts.
How expert guidance helps
Correct block classification from year one prevents future WDV confusion. WealthSure can support startups and companies through company ITR filing services and tax planning review.
Why depreciation planning affects tax, cash flow and compliance
Depreciation is not just a technical schedule. It affects your taxable business income. A correct depreciation claim can reduce taxable profit, while an incorrect claim can cause underpayment or overpayment of tax. It also affects advance tax because businesses estimate tax liability during the year based on expected profit after allowable expenses and depreciation.
For founders and MSME owners, depreciation planning can also guide purchase timing. Buying and putting an asset to use before the 180-day threshold may allow a full-rate claim for that year, while purchases near year-end may receive only half-rate depreciation. However, tax should not be the only reason to buy an asset. The purchase should make commercial sense, be documented and be used for business.
Depreciation also affects borrowing and investor communication. Your books may show one depreciation amount, while your tax computation shows another. Finance teams should be able to reconcile book profit, tax depreciation, deferred tax where applicable and taxable income. Companies should review financial reporting requirements and may also refer to official regulatory guidance from the Ministry of Corporate Affairs where Companies Act reporting is relevant.
Where depreciation appears in ITR filing
Depreciation is relevant where the taxpayer reports business or professional income. Depending on the taxpayer type and income profile, this may involve ITR-3, ITR-5, ITR-6 or other relevant forms. Some presumptive taxation cases have simplified reporting, but taxpayers should not assume that every business can ignore fixed asset records. The applicable form, schedules and reporting requirements should be checked for AY 2026-27 when the official utilities are used.
For a proprietor or professional, depreciation may influence the profit and loss account and computation under the head “Profits and gains from business or profession.” For firms and LLPs, depreciation interacts with partner remuneration, interest, book profit and business income. For companies, depreciation impacts tax computation, book-tax reconciliation and reporting discipline.
If your return involves capital purchases, multiple assets, professional income, business loans, GST, vehicle use, capital gains or old asset sales, consider using expert-assisted tax filing rather than self-filing without a depreciation schedule.
Common depreciation mistakes to avoid in FY 2025-26
Depreciation mistakes are easy to make and sometimes difficult to fix later because opening WDV carries forward year after year. Here are the most common issues WealthSure sees in business and professional tax filing contexts.
Documents to keep for depreciation claims
A depreciation claim should be supported by documents. The larger the asset value, the more disciplined your records should be. Good documentation also helps in case of scrutiny, notice, audit, bank finance, investor diligence or future sale of assets.
- Tax invoice or purchase bill.
- Payment proof and loan documents, if financed.
- Asset register with date of purchase and put-to-use date.
- Installation certificate, delivery challan or commissioning report where relevant.
- GST treatment and input tax credit record, if applicable.
- Insurance policy or warranty documents.
- Business-use evidence such as logbooks, usage records or internal approvals.
- Sale invoice or scrap records for assets disposed of during the year.
- Previous year depreciation schedule and opening WDV.
For businesses with a tax audit requirement, books and depreciation schedules should be even more carefully reconciled. Where notices arise due to mismatch, disallowance or incorrect reporting, WealthSure’s income tax notice response support can help review facts and prepare a structured response.
Industry-wise depreciation checkpoints
Different businesses face different depreciation issues. A clinic has medical equipment and computers. A restaurant may have kitchen equipment, furniture and building improvements. A logistics business may have vehicles. A software startup may have laptops, servers, cloud infrastructure and software licences. A manufacturer may have plant, machinery, pollution control equipment, power equipment and factory buildings.
| Business Type | Assets to Review | Common Risk | WealthSure Review Focus |
|---|---|---|---|
| Freelancers and consultants | Laptop, software, phone, office furniture | Mixing personal and professional use | Business-use support, correct form, professional income computation |
| Clinics and medical professionals | Medical equipment, computers, furniture, interiors | Applying higher rate to non-listed equipment | Asset classification and documentation |
| Restaurants and cafes | Kitchen equipment, furniture, electrical fittings, leasehold improvements | Treating capital setup costs as revenue expenses | Capitalisation, depreciation and GST reconciliation |
| Logistics and transport | Goods vehicles, cars, GPS systems, workshop equipment | Using wrong vehicle rate | Nature of business use and vehicle documentation |
| Manufacturing | Plant, machinery, factory building, pollution control equipment | Wrong special-rate claim or missed additions | Block-wise schedule and audit-ready records |
| Startups and technology companies | Laptops, servers, software, IP rights, office setup | Single-rate treatment for different assets | Segregation of computer, furniture, intangible and general blocks |
Depreciation and tax planning: what is ethical and what is not
Depreciation planning is legitimate when it reflects real asset ownership, actual business use, correct classification and proper documentation. It becomes risky when taxpayers buy unnecessary assets only to reduce tax, claim personal assets as business assets, inflate asset cost, use higher rates without eligibility or ignore put-to-use conditions.
For FY 2025-26, ethical tax planning means asking practical questions before the year ends:
- Do we have a clean asset register?
- Have all capital purchases been separated from revenue expenses?
- Are the depreciation rates aligned with Appendix I?
- Were assets actually put to use before claiming depreciation?
- Have sold, scrapped or replaced assets been adjusted in the block?
- Does the depreciation claim align with books, GST records and invoices?
- Will the claim stand up if questioned later?
WealthSure’s tax optimizer service and investment-linked tax planning can help taxpayers look beyond one deduction and build a broader tax strategy that is compliant, documented and aligned with business goals.
Pre-filing depreciation checklist for FY 2025-26
Before filing your return for AY 2026-27, use this checklist to avoid common depreciation gaps.
| Checkpoint | Why It Matters | Status |
|---|---|---|
| Opening WDV matched with last year’s return | Prevents carry-forward errors in block computation | Yes / No |
| All asset purchases identified from books and bank records | Prevents missed additions or wrong expense booking | Yes / No |
| Assets classified into correct blocks | Ensures correct depreciation rates | Yes / No |
| Put-to-use date documented | Supports full-rate or half-rate claim | Yes / No |
| Assets used less than 180 days separately identified | Applies half-rate restriction correctly | Yes / No |
| Sale proceeds and scrap value adjusted | Prevents wrong closing WDV or tax treatment | Yes / No |
| Book depreciation reconciled with tax depreciation | Helps explain differences in profit and tax computation | Yes / No |
| Business-use evidence maintained | Supports claim for cars, laptops, phones and shared-use assets | Yes / No |
| ITR schedule reviewed before submission | Reduces defective return, mismatch and notice risk | Yes / No |
Preparing a business or professional ITR for AY 2026-27? WealthSure can help you review depreciation, asset schedules, income computation, tax payable and compliance risk before filing.
Explore WealthSure ITR filing servicesOfficial sources and references taxpayers should verify
Tax law can change through amendments, notifications, circulars and updated return utilities. For depreciation, the most useful official references are the Income Tax Act, Income Tax Rules, Appendix I and the e-filing portal utilities for the applicable assessment year. Taxpayers may check statutory material through the official Income Tax Department website and file returns through the official e-Filing portal.
For companies, book depreciation and financial statement disclosures may require a separate review under company law and accounting rules. The Ministry of Corporate Affairs provides company-law resources. Where assets are financed through banks or business loans, financial reporting and loan covenants may also matter. General regulatory context may also be checked through official sources such as the Reserve Bank of India where banking and financial-system rules are relevant.
FAQs on Depreciation Rates for FY 2025-26 Under Income Tax Act
1. What are depreciation rates for FY 2025-26 under Income Tax Act?
Depreciation rates for FY 2025-26 under Income Tax Act are the prescribed rates used for eligible depreciable assets owned and used for business or profession. The rates are not decided casually by the taxpayer. They come from the Income Tax Rules, particularly Appendix I read with Rule 5, while Section 32 provides the basic legal framework for the depreciation allowance. Commonly used rates include 5% for buildings used mainly for residential purposes, 10% for non-residential buildings and furniture, 15% for general plant and machinery, 40% for computers including computer software, and 25% for specified intangible assets such as know-how, patents, copyrights, trademarks, licences, franchises and similar business rights.
The correct rate depends on asset classification, actual use, ownership, put-to-use date and whether the asset falls into a special category. A normal motor car used by a business owner is not the same as a taxi used in the business of running vehicles on hire. Similarly, general equipment is not automatically a computer just because it has electronic components. Before filing, businesses should review invoices, asset registers and previous-year WDV schedules. For complex assets, professional advice can prevent both underclaiming and overclaiming.
2. How is depreciation calculated under the Income Tax Act for FY 2025-26?
Depreciation under the Income Tax Act is generally calculated on the written down value of the relevant block of assets. The broad process is to start with the opening WDV of the block, add eligible asset purchases during FY 2025-26, reduce sale proceeds or scrap value of assets sold from that block, and then apply the prescribed depreciation rate. Where an asset is acquired during the year and put to use for less than 180 days, the first-year depreciation on that asset is generally restricted to 50% of the normal rate.
For example, if a business has an opening WDV of ₹5,00,000 in a 15% plant and machinery block and buys additional machinery for ₹2,00,000 in May 2025, the adjusted block may be ₹7,00,000 before depreciation, assuming no sale. If the machinery is used for more than 180 days, depreciation may be ₹1,05,000 at 15%. If the addition was made and put to use in January 2026, the half-rate rule may apply to the new addition, while the old block may continue at the normal rate. Actual computation should be prepared carefully using the return utility and supporting records.
3. What is the 180-day rule for depreciation and why is it important?
The 180-day rule is one of the most important depreciation checks during ITR filing. If an asset is acquired during the previous year and is put to use for the purposes of business or profession for less than 180 days in that year, depreciation for that first year is generally restricted to 50% of the normal rate. This does not mean the asset is permanently eligible only for half depreciation. It means the first-year claim is restricted because the asset was used for a shorter period during that financial year.
For FY 2025-26, this rule becomes relevant for assets bought and put to use in the second half of the financial year, especially around October to March. A computer normally eligible at 40% may effectively get 20% in the first year if it is put to use for less than 180 days. A machine normally eligible at 15% may get 7.5% for the first year. Businesses often make the mistake of using the invoice date alone. The safer approach is to document when the asset was delivered, installed, ready for use and actually used in business.
4. What is the depreciation rate for computers and software in FY 2025-26?
Computers including computer software are generally eligible for 40% depreciation under the Income Tax Rules, subject to the asset being owned and used for the purposes of business or profession. This category is highly relevant for freelancers, consultants, digital agencies, software companies, startups, design professionals, architects, doctors using digital systems and many small businesses. Laptops, desktops and eligible computer software may fall within this block, but classification should still be based on the nature of the asset and the official notes.
The 40% rate should not be applied to every electronic asset. Printers, networking devices, office equipment, embedded systems or electronic machinery may require separate review depending on facts and prevailing interpretation. Also, the treatment of software can depend on whether it is a capital software licence, subscription, cloud service or normal revenue expense. If a computer or software is acquired and put to use for less than 180 days in FY 2025-26, the first-year depreciation may be restricted to 20%. Keep invoices, payment proof, licence details and business-use evidence.
5. What is the depreciation rate for plant and machinery under Income Tax Act?
General plant and machinery are commonly eligible for 15% depreciation under the Income Tax Act, unless the asset falls into a specific category with a different prescribed rate. This 15% rate often applies to standard business machines, factory equipment, operational equipment and many non-specialised plant assets. However, the word “machinery” should not be used loosely. Some assets have specific treatment: computers may be eligible at 40%, certain vehicles may have different rates, renewable energy devices and pollution control equipment may have specific higher rates, and furniture or electrical fittings are generally not part of the 15% plant block.
Correct classification is especially important for manufacturers, clinics, restaurants, warehouses, repair workshops and service businesses. When in doubt, review the asset’s function, invoice description, installation records and Appendix I category. If the asset is acquired late in the year and put to use for less than 180 days, the first-year claim may be half of the normal rate. A clean asset register with rate-wise blocks helps avoid errors in ITR schedules and future-year WDV.
6. Can freelancers and professionals claim depreciation?
Yes, freelancers and professionals can claim depreciation where they own eligible assets and use them for the purposes of their profession or business. Common examples include laptops, desktops, cameras, professional equipment, office furniture, printers, clinic equipment, studio equipment and software licences. The claim should be linked to professional income and supported by documents. A person earning only salary generally does not claim depreciation against salary income, but a salaried individual with a separate freelancing or business activity may need to evaluate depreciation for assets used in that activity.
The main challenge for freelancers is mixed use. A laptop, phone, car or home-office setup may be used partly for personal purposes and partly for professional work. In such cases, the taxpayer should maintain reasonable business-use evidence and avoid aggressive claims. The applicable ITR form also matters. Many freelancers with professional income use ITR-3 unless eligible for presumptive taxation and other conditions. WealthSure can help professionals classify assets, review expenses, compare tax options and file accurately.
7. Is depreciation different in books of account and income tax return?
Yes, depreciation in books of account and depreciation in the income tax return can be different. Book depreciation is recorded for accounting and financial reporting purposes. It may follow Companies Act Schedule II, accounting standards, useful-life estimates or management policy. Income tax depreciation, on the other hand, is calculated according to the Income Tax Act and Income Tax Rules using prescribed rates and block-wise written down value. Therefore, a business may show one depreciation number in the profit and loss account and a different allowable depreciation number in the tax computation.
This difference is normal, but it must be reconciled. For companies, the difference may also affect deferred tax calculations and tax audit reporting. For proprietors and professionals, the difference can affect taxable income and ITR schedules. Problems arise when taxpayers copy accounting depreciation directly into tax computation without checking rates, block classification or 180-day restrictions. A proper depreciation schedule should show opening WDV, additions, deletions, rate-wise classification, depreciation and closing WDV for tax purposes.
8. What happens when a depreciable asset is sold during FY 2025-26?
When a depreciable asset is sold, the tax treatment depends on the block of assets. Under the block system, sale proceeds are generally reduced from the written down value of the relevant block. If assets remain in the block and the block continues, depreciation may be calculated on the adjusted WDV. If the entire block is transferred or the sale consideration exceeds the block value, additional tax consequences may arise. This is why asset-sale entries should not be handled casually as simple profit or loss on sale in the accounting system.
For example, if a business sells an old machine from a 15% block but still has other assets in that block, the sale value is reduced from the block and depreciation is calculated on the balance. If the sale value wipes out or exceeds the block, the computation may lead to different treatment. Asset sales are common during upgrades, business closures, vehicle replacements and restructuring. Businesses should keep sale invoices, scrap records, insurance settlement papers and board or owner approvals where relevant. Professional review is recommended for large disposals.
9. Can depreciation reduce tax payable or create a business loss?
Depreciation reduces taxable business or professional income because it is an allowable deduction, subject to conditions. If depreciation is large compared with profit, it can significantly reduce tax payable. In some cases, it may create or increase a business loss or unabsorbed depreciation. However, taxpayers should not treat depreciation as a guaranteed tax-saving tool. The claim must be based on real eligible assets, correct rates, ownership, business use and proper documentation. Artificial or unsupported claims can create compliance risk.
Unabsorbed depreciation and business losses have specific set-off and carry-forward rules. Their treatment may differ depending on the nature of income, return filing compliance and applicable provisions. Depreciation also affects advance tax estimates because tax liability is based on expected taxable income after allowable deductions. Businesses with major asset purchases should review the tax impact during the year rather than waiting until the ITR deadline. WealthSure can assist with depreciation review, tax computation and advance tax planning for business owners and professionals.
10. How can WealthSure help with depreciation rates and business tax filing?
WealthSure can help taxpayers move from guesswork to structured compliance. Depreciation is not only a rate table exercise. It requires reviewing invoices, asset use, business model, put-to-use date, opening WDV, additions, deletions, book depreciation, tax depreciation, ITR schedules and future-year impact. This is particularly useful for freelancers, professionals, startups, clinics, transport businesses, restaurants, MSMEs, firms, LLPs and companies with multiple asset categories.
As a fintech-powered tax filing and advisory platform, WealthSure supports income tax return filing, business and professional ITR preparation, tax planning, advance tax calculation, revised or updated return review, and notice response. If your depreciation schedule is simple, self-service filing may be enough after careful review. If assets are high-value, mixed-use, sold during the year, financed, imported, capitalised differently in books or connected with business restructuring, expert-assisted filing is safer. WealthSure focuses on accuracy, documentation and practical decision-making rather than aggressive or unsupported claims.
Conclusion
Understanding depreciation rates for FY 2025-26 under Income Tax Act helps business owners, freelancers, professionals and companies file more accurate returns and plan cash flow with better confidence. Depreciation affects taxable profit, advance tax, business loss, closing WDV and future-year tax computation. A small classification error today can continue into future years through the block-of-assets schedule.
Self-service filing may be enough where the taxpayer has a simple business, clean records and a small number of straightforward assets. Expert-assisted support becomes safer when there are multiple asset blocks, late-year purchases, vehicle claims, special-rate assets, intangible rights, asset sales, book-tax differences, tax audit requirements or prior-year WDV uncertainty. The right approach is not aggressive tax reduction. It is accurate, documented and compliant tax planning.
Before filing for AY 2026-27, review your asset register, invoices, GST records, put-to-use dates and depreciation schedule. Compare book depreciation with tax depreciation. Check official sources for updated rules and return utility requirements. If you are unsure, WealthSure can help you review the computation and file with confidence through Income Tax Return filing online, tax expert support and tax saving suggestions.
File your business ITR with a cleaner depreciation schedule. WealthSure can help you classify assets, calculate depreciation, review tax impact and prepare a compliant return.
Get expert-assisted business ITR supportAt WealthSure, we don’t just file taxes — we simplify your financial journey and help you build long-term wealth with confidence.
Disclaimer
This article is for general informational and educational purposes only. It does not constitute tax, legal, accounting, investment or professional advice. Depreciation eligibility, rates, tax treatment, ITR reporting and documentation requirements may change based on amendments, notifications, assessment year, asset type, taxpayer profile and facts of the case. Please verify the latest law and filing utility on official government portals or consult a qualified tax professional before filing your return or making financial decisions. WealthSure may provide advisory, filing, documentation and compliance support based on the information provided by the taxpayer. Tax benefits are subject to eligibility, documentation and applicable law. Refunds, assessments and processing outcomes are subject to the Income Tax Department.