Section 33(1)

A deduction in respect of depreciation of—

(a) Tangible Assets - buildings, machinery, plant^[S-66(17)] or furniture;

(b) Intangible Assets - know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st April, 1998,

not being goodwill of a business or profession

owned wholly or partly by the assessee and

used wholly and exclusively for the purposes of business or profession,

shall be allowed, as per the provisions of this section.

No depreciation is allowable on land on which the building is erected because the term ‘building’ refers only to superstructure but not the land on which it has been erected.

Assets must be used for business or profession

The assets should be actually used by the assessee for purposes of his business during the tax year. The asset must be put to use at any time during the tax year.

Depreciation is allowable not only in respect of assets “wholly” owned by the assessee but also in respect of assets “partly” owned by him and used for the purposes of his business or profession.

Assessee must own the assets, wholly or partly

Goodwill Exluded

Specifically excludes Goodwill from the definition of intangible assets eligible for depreciation.

Section 33(12)(a)

For the purposes of this section, assets” mean—

(i) tangible assets, being buildings, machinery, plant^[S-66(17)] or furniture;

(ii) intangible assets being–

(A) know-how; or

(B) patents; or

(C) copyrights; or

(D) trademarks; or

(E) licenses; or

(F) franchises; or

(G) any other similar business or commercial rights, but not being goodwill of a business or profession;

Section 33(12)(b)

For the purposes of this section, “know-how” means

any industrial information or technique likely to assist

in the manufacture or processing of goods or

in the working of a mine, oil-well or other sources of mineral deposits (including searching for discovery or testing of deposits for the winning of access thereto);

Section 33(3)(a) read with Rule 25(1)

Subject to the provisions of sub-rule (7),

deduction in respect of depreciation of any block of assets^[S-2(17)] specified in column (2) of the Table in Appendix I

shall be calculated at % specified in column (3) of the said Table

on the written down value of such block of assets

as are used for the purposes of the business or profession of the assessee at any time during the tax year

Section 33(12)(d)

For the purposes of this section, “written down value of the block of assets”

shall have the same meaning as in section 41(1)(c).

Section 33(3)(b)

when any building, machinery, plant or furniture is partly, or not wholly and exclusively, used for the purposes of the business or profession,

the deduction u/c (a) shall be restricted to the fair proportionate part thereof

as determined by AO, having regard to the usage of such building, machinery, plant or furniture for the purposes of the business or profession;

Section 33(3)(c)

when deduction of actual cost in respect of any machinery or plant has been allowed u/s 54,

no deduction under this sub-section shall be allowed.

Section 33(4)

The deduction under this section shall be restricted to 50% of the prescribed rate,

if such asset, being asset referred to in sub-sections (2) and (3) is–

(a) acquired by the assessee during the tax year; and

(b) put to use for the purposes of business or profession for less than 180 days in that tax year

This restriction applies only to the year of acquisition and not for subsequent years.

Section 33(6)

Where a building, not owned by the assessee, is held on lease or by any other right of occupancy

is used for the purposes of business or profession of the assessee,

and if any capital expenditure is incurred by the assessee for the purposes of business or profession on construction of any structure or any work by way of renovation, extension or improvement to such building,

then such structure or work shall be treated as a building owned by the assessee for the purposes of this section.

Section 33(7)

The provisions of this section shall apply whether or not the assessee has claimed deduction for depreciation in computing his total income.

Section 33(11)

(a) Where the profits and gains chargeable for the tax year before allowing the deduction under sub-sections (1) to (10) is less than such allowable deduction, then–

(i) if such profits and gains is not a loss, the deduction u/ss (1) to (10) shall be allowed to the extent of the available profits and gains;

(ii) if such profits and gains is a loss, no deduction u/ss (1) to (10) shall be allowed;

(b) the amount of deduction which has not been allowed under clause (a) shall be added to the allowable deduction under this section, whether available or not, for the succeeding tax year and the total amount shall be deemed to be eligible for deduction in that year, and so on for the succeeding tax years; and

(c) the provisions of this sub-section shall be subject to the provisions of sections 112(3) and 113(4).

If the business profits for the tax year are insufficient to absorb the calculated depreciation deduction:

• The deduction is allowed to the extent of available profits.
• If there is a net loss or remaining unabsorbed depreciation, it is carried forward to the following tax year(s) and added to that year’s depreciation allowance, effectively allowing it to carry forward indefinitely until fully offset.

Ex

In Tax Year 2025, Delta Startup has a business profit of ₹2,00,000 before depreciation. Its calculated depreciation is ₹5,00,000. The profit is reduced to Nil using ₹2,00,000 of the depreciation.

The remaining ₹3,00,000 becomes Unabsorbed Depreciation, which is carried forward to Tax Year 2026 to be set off against any future income.

Rule 25(2)

Deduction u/s 33(3) in respect of depreciation of any block of assets

with respect to the persons mentioned in Column B of the following Table

shall not exceed 40% of WDV of such block of assets,

if conditions mentioned in column C thereof are fulfilled

SN

Person

Conditions to be fulfilled

A

B

C

1.

Domestic company

Which has exercised option under–

(a) section 199(3); or

(b) section 200(5); or

(c) section 201(2).

2.

(a) Individual or HUF; or

(b) AOP or a BOI, whether incorporated or not; or

(c) artificial juridical person referred to in section 2(77)(g).

Whose income is chargeable to tax u/s 202(1).

3.

Cooperative society resident in India

Which has exercised option under–

(a) section 203(5); or

(b) section 204(2).

Section 33(5)

The aggregate deduction in respect of depreciation allowable

to the predecessor and successor in cases of succession u/s 70(1)(zd) or (ze) or (zf), or section 313, or

to the amalgamating and the amalgamated company in the case of amalgamation, or

to the demerged and resulting company in the case of demerger, as the case may be,

for any tax year,

shall not exceed the deduction calculated at the prescribed rates under this section as if the succession, amalgamation or demerger had not taken place, and

such deduction shall be allowed on pro rata basis based on number of days for which assets were used by the following:–

(a) predecessor and successor, in case of such succession; or

(b) amalgamating company and the amalgamated company in case of an amalgamation; or

(c) demerged company and the resulting company in case of a demerger.

Section 33(8)

In addition to deduction u/ss (3), additional depreciation for any new machinery or plant shall be allowed, when—

(a) assessee is engaged in the business of

manufacture or production of any article or thing or

generation, transmission or distribution of power;

(b) assessee acquires and installs the new machinery or plant;

(c) new machinery or plant is first put to use by the assessee for the purposes of business; and

(d) the new machinery or plant (not being a ship or an aircraft)—

(i) was not used either within or outside India by any other person before its installation by the assessee;

(ii) is not installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house;

(iii) is not in the nature of any office appliances or road transport vehicle; or

(iv) is not an asset on which the whole of the actual cost is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income under the head “PGBP” of any tax year.

Section 33(9)

The additional deduction in respect of depreciation referred to in sub-section (8) shall be–

(a) 20% of the actual cost of the new machinery or plant in the tax year when it is acquired and put to use, subject to the provisions of clause (b); or

(b) 10% of the actual cost, if the new machinery or plant is acquired and put to use for less than 180 in the relevant tax year, and 10% of the actual cost shall be allowed in the immediately succeeding tax year.

Circular No. 15/2016, dated 19-5-2016

The CBDT has, vide this Circular, clarified that the business of printing or printing and publishing amounts to manufacture or production of an article or thing and is, therefore, eligible for additional depreciation u/s 32(1)(iia).

Section 33(2) read with Rule 25(3)

In case of assets referred to in sub-section (1) of an undertaking engaged in generation or generation and distribution of power,

acquired on or after 1st April, 1977 specified in column (2) of the Table in Appendix II,

depreciation shall be calculated at % specified in the column (3) thereof

on the actual cost to the assessee

as are used for the purposes of the business of the assessee at any time during the tax year.

Rule 25(4)

The aggregate depreciation allowed under section 33(2), in respect of any asset for different tax years shall not exceed the actual cost of the said asset.

Rule 25(5)

The undertaking specified in section 33(2)

may, at its option, be allowed depreciation u/sr (1) read with Appendix I instead of the depreciation specified in Appendix II,

if option is exercised on or before the due date for furnishing ROI u/s 263(1)(c) for the tax year in which it begins to generate power.

Rule 25(6)

Any option u/sr (5) once exercised, shall be final and shall apply to all the subsequent tax years.

Section 33(10)

The difference between WDV and the moneys payable^[S-66(13)] including the scrap value, if any, for any tangible asset in respect of which depreciation is claimed and allowed u/ss (2),

shall be allowed as deduction when—

(a) such asset is sold, discarded, demolished or destroyed in the tax year not being the tax year in which it is first put into use;

(b) moneys payable including the scrap value, if any, is less than its WDV; and

(c) such deficiency is actually written off in the books of account of the assessee.