Depreciation allows businesses to claim a deduction for the reduction in asset value over time under Section 32 of the Income Tax Act. In India, assets such as vehicles, computers and furniture are depreciated using prescribed rates and the Written Down Value (WDV) method.
For most businesses, the vehicle depreciation rate is typically 15%, while computers are depreciated at 40% and furniture at 10%. Understanding these rates and applying them correctly helps ensure accurate tax calculation, compliance and better financial planning.
Depreciation rate on vehicle, computer and furniture at a glance
The following tables summarise the applicable depreciation rates under the Income Tax Rules.
Vehicle Depreciation Table
|
Asset Type |
Condition |
Income Tax Rate (%) |
|
Motor cars (non-hire use) |
General |
15 |
|
Motor cars (non-hire, Aug 2019–Apr 2020) |
Special case |
30 |
|
Motor buses, lorries, taxis (hire use) |
General |
30 |
|
Motor buses, lorries, taxis (special period 2019–20) |
Hire business |
45 |
|
Commercial vehicles (specific older cases) |
Various conditions |
40–60 |
|
Electrically operated vehicles |
General |
40 |
Note: The applicable vehicle depreciation rate depends on usage, ownership conditions and specific provisions under tax rules.
Computer depreciation table
|
Asset Type |
Coverage |
Income Tax Rate (%) |
|
Computers (including software) |
General |
40 |
|
Servers & networks |
Data processing units |
40 |
|
Computer software |
As defined (programs, storage media) |
40 |
Furniture depreciation table
|
Asset Type |
Coverage |
Income Tax Rate (%) |
|
General furniture & fittings |
Includes electrical fittings |
10 |
|
Furniture in hotels, restaurants and institutions |
Special usage |
10 |
|
Electrical fittings (wiring, switches, fans, etc.) |
Included in furniture |
10 |
Block of assets concept
Under the Income Tax Act, depreciation is calculated on a block of assets rather than individual items. Assets are grouped based on type and depreciation rate.
- All assets with the same vehicle depreciation rate (for example, 15%) are grouped in one block.
- Computers and related equipment with a 40% rate form another block.
- Furniture and fittings with a 10% rate are treated as a separate block.
Once an asset is added to a block, its individual identity is not tracked separately for depreciation purposes.
How to calculate depreciation (step by step)
Once an asset is added to a block, its individual identity is not tracked separately for depreciation purposes.
- Identify the correct block of assets based on the applicable depreciation rate
- Take the opening WDV of the block
- Add the value of assets purchased during the year
- Apply half the depreciation rate if assets are used for less than 180 days
- Subtract the value of assets sold, discarded or transferred
- Apply the applicable depreciation rate to the remaining block value
- Carry forward the reduced WDV to the next financial year
This process ensures the correct application of rates, including the relevant vehicle depreciation rate where applicable.
Conclusion
Applying the correct depreciation rates on vehicles, computers and furniture is essential for accurate tax computation. Using the WDV method, following the block of assets concept and applying the appropriate vehicle depreciation rate helps businesses stay compliant and optimise tax outcomes.
With TallyPrime, businesses can manage asset records, apply depreciation rates correctly and maintain accurate financial statements with ease.
