Depreciation Under Section 32 of the Income Tax Act

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Last Updated: 20th January 2026 - 11:28 am

Depreciation under Section 32 of the Income Tax Act plays an important role in business taxation in India. It allows taxpayers to claim a deduction for the reduction in value of assets used for business or professional activities. This provision helps align taxable income with the actual usage of assets over time.

What Is Depreciation Under Section 32

Depreciation refers to the gradual decline in the value of tangible and intangible assets due to regular use or passage of time. Under Section 32 of income tax, depreciation is allowed only when the asset is owned and used for business purposes during the financial year. The deduction is applied even if depreciation is not shown in the books.

Method of Calculating Depreciation

The Income Tax Act mainly follows the Written Down Value (WDV) method. Assets are grouped into blocks based on similar nature and depreciation rates. Once an asset enters a block, it loses its individual identity. Depreciation is calculated on the total value of the block after considering purchases and sales during the year.

Applicable Depreciation Rates

Different asset classes have different rates. Plant and machinery, furniture, computers, buildings, and intangible assets such as licences or trademarks are all covered. Computers and certain specialised assets attract higher rates, while buildings generally have lower rates. Land and goodwill are excluded.

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Why Section 32 Matters

Depreciation under Section 32 of the Income Tax Act provides a structured way to reduce tax liability. It reflects real business usage, supports long-term planning, and ensures consistency in tax calculations.

This makes Section 32 a key provision for businesses managing capital assets efficiently.

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