What are the income-tax depreciation rates, and how does the half-year rule work?

Common rates (written-down value)

Goodwill is not a depreciable asset. Check the current rules for the full list before you rely on a rate.

How the block works

Assets with the same rate form one block. Each year:

Opening written-down value + additions − sale proceeds = value on which depreciation is charged

• If sale proceeds exceed the block's value, the excess is a short-term capital gain, even for an asset held for years.
• If all assets in a block are sold and money is left in the block, that is a short-term capital loss.

The 180-day rule

An asset acquired and put to use for less than 180 days in the year gets half the normal rate in that year. The full rate applies from the next year on its written-down value.

Additional depreciation

A business manufacturing or producing goods gets additional depreciation of 20% of the cost of new plant and machinery (35% in certain notified backward areas). If the machine is used for less than 180 days, half is allowed now and the balance next year.

It is not available for second-hand machinery, office equipment, vehicles, or assets installed in offices or residences. It is also not available to companies under the 22% regime (section 115BAA of the 1961 Act, now section 200) or to individuals under the new tax regime (section 115BAC, now section 202).

Books and tax differ

Companies charge book depreciation over useful lives under Schedule II of the Companies Act (see our Schedule II useful lives). The difference between book and tax depreciation is a timing difference for deferred tax.